Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Royal Assent

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Juries (Disqualification) Act 1984.
2. Data Protection Act 1984.
3. Mental Health (Scotland) Act 1984.
4. Child Abduction Act 1984.
5. Cycle Tracks Act 1984.
6. Video Recordings Act 1984.
7. Animal Health and Welfare Act 1984.
8. Agricultural Holdings Act 1984.
9. Matrimonial and Family Proceedings Act 1984.
10. Selby Bridge Act 1984.
11. Swavesey Bye-ways Act 1984.
12. Charing Cross and Westminster Medical School Act 1984.
13. Anglian Water Authority (King's Lynn Tidal Defences) Act 1984.
14. Cardiff City Council Act 1984.

Mr. Skinner: On a point of order, Mr. Speaker. When a Government have been elected on a manifesto, it is strange not to pass Acts of Parliament——

Mr. Speaker: Order. The Clerk will now proceed to read the titles of the Private Bills set down for consideration this day.

PRIVATE BUSINESS

SHREWSBURY AND ATCHAM BOROUGH COUNCIL BILL [Lords]

As amended, considered; to be read the Third time.

CORNWALL COUNTY COUNCIL [Lords] (By Order)

COUNTY OF LANCASHIRE BILL [Lords] (By Order)

Orders for consideration, as amended, read.

To be considered upon Thursday 19 July.

NOTTINGHAMSHIRE COUNTY COUNCIL BILL [Lords] (By Order)

Order for further consideration, as amended, read.

To be further considered upon Thursday 19 July.

Oral Answers to Questions — NATIONAL FINANCE

Gay's the Word Bookshop

Mr. Chris Smith: asked the Chancellor of the Exchequer what representations he has received in respect of the recent raid by Her Majesty's Customs and Excise on Gay's the Word bookshop in Marchmont street.

Mr. Simon Hughes: asked the Chancellor of the Exchequer on what date the decision was taken to issue the seizure notice served on Gay's the Word bookshop by the Customs and Excise on 6 June.

The Economic Secretary to the Treasury (Mr. Ian Stewart): The decision to issue the seizure notice was taken on 6 June. Eighty letters of protest have been received, of which 26 were forwarded by hon. Members. There have also been nine written questions on the matter.

Mr. Smith: Will the Minister tell the House why the decision was taken to use the customs procedures against an entirely non-commercial organisation which provides a much valued service? Will he also tell the House why the bookshop and its directors are still suffering harassment by officers of the Customs and Excise, and whether any political impetus was placed behind the original decision?

Mr. Stewart: I am surprised to hear the hon. Gentleman describe the import of obscene and indecent articles as a "much valued service". I should have thought that most hon. Members would think that the Customs and Excise ought properly to enforce the Customs Consolidation Act 1876, which charges it with prohibiting the import of obscene and indecent articles, and that the Customs and Excise needs to take whatever steps are necessary to prevent that taking place.

Mr. Hughes: Does the Minister realise that by his answer he has prejudged an important issue? No decision has yet been taken on whether the literature is obscene or indecent. Will the Minister assure the House that he and his right hon. Friend the Chancellor of the Exchequer will look into the crucial matter of the workings of the Customs and Excise, which deal by one standard with one set of literature because it is imported, and by another with literature that is produced here, and selectively against one outlet of that literature when it is readily available in many other places?

Mr. Stewart: I certainly have not prejudged the issue. However, in many judgments the courts have said that the Customs and Excise must rely on the normal meaning of the words "obscene and indecent", and if it judges the articles to be such it should apprehend them. The matter will no doubt be resolved in due course through the courts, and I hope that the hon. Gentleman will at least accept that that is an entirely impartial way of dealing with it.

Mr. Adley: Why is my hon. Friend surprised that Labour Members support the import of obscene and indecent material?

Mr. Stewart: I am surprised that anyone should believe that there should be discrimination in favour of


importing obscene and indecent articles. I should have thought that the whole House would support what has been done.

Mr. Dobson: The bookshop is in my constituency. Will the Minister confirm that none of my constituents has complained about it, but that many parents in the area are worried about the massive increase in heroin addiction? Does he think that the Customs and Excise should give priority to stopping the import of heroin, rather than playing the fool with a bookshop?

Mr. Stewart: Increased numbers of Customs and Excise staff are devoted to dealing with the drug problem. However, I hope that the hon. Gentleman is not suggesting that they should not also deal with the import of obscene and indecent articles.

Personal Taxation

Mr. Nicholls: asked the Chancellor of the Exchequer if he will consider the scope for reductions in personal taxation in the forthcoming year, taking into account the conflicting demands made by the social services allocation.

The Chancellor of the Exchequer (Mr. Nigel Lawson): The Cabinet has reaffirmed the need to keep public spending at broadly constant levels in real terms. On this basis, there is a reasonable prospect of further cuts in personal taxation in next year's Budget.

Mr. Nicholls: Will my right hon. Friend accept that his achievement and that of his predecessor in reducing rates of income tax while fully protecting retirement pensions against inflation reflects great credit upon him? Does he agree that in our desire to achieve further cuts in income tax we should keep in the forefront of our minds the need to protect those pensions?

Mr. Lawson: I am grateful to my hon. Friend for his comments. Of course the Government are committed to maintaining the purchasing power of the old-age pension, and I am glad to say that since we have been in office we have done a little better than that.

Mr. Kirkwood: If the Chancellor has any spare resources to give away, will he consider child benefit as a cost-effective way of giving help to the most needy families in the country? Will he especially ask his Department to recalculate his recent memorandum for the Select Committee on the Treasury and Civil Service and use a much broader base than the 100,000 acute cases?

Mr. Lawson: I think that the memorandum produced by the Treasury for the Select Committee on the Treasury and Civil Service, and published by that Committee, is a considerable help in elucidating the problems of the poverty trap and the unemployment trap, which are misunderstood by many hon. Members. Child benefit is at its highest level in real terms. But we must decide whether to give priority to increases in child benefit over revalorisation or increases in tax thresholds, because clearly the same pound cannot be spent twice. The priority decided by me and my hon. Friends hitherto— and I think that we should adhere to it—is that it is more important to use the resources available to increase tax thresholds.

Mr. Powley: Before he gives out money, will my right hon. Friend remember, as I am sure he does constantly,

that he is giving out taxpayers' money? Does he agree that before we listen to demands from the Opposition to increase pensions, social services and public expenditure, we should remember that those increases would increase the borrowing requirement, lead to inflation and affect the value of the pound, and that money has to be earned before the Government can give it out?

Mr. Lawson: My hon. Friend is right. His strictures would be more properly addressed to the Opposition, who have never understood them. We have succeeded in getting the borrowing requirement down, and—as I said when I answered the original question—provided that we succeed in keeping public expenditure constant in real terms the growth in the economy can be applied to reductions in taxation, which it is the Government's firm commitment to achieve.

Mr. Skinner: He will be asking Argentina to bail him out.

Mr. Speaker: Order. I must tell the hon. Member for Bolsover (Mr. Skinner) that it bores the House to death to hear his constant interruptions from a sedentary position. I must ask him to desist, please.

Mr. Skinner: I was only making the point——

Mr. Speaker: Order. Mr. Hattersley.

Mr. Hattersley: Referring to the social services allocation as mentioned in the original question, will the Chancellor now tell us when he proposes to announce the cuts in public expenditure which the Treasury has told various newspapers will be part of the right hon. Gentleman's response to the depreciating pound?

Mr. Lawson: The Treasury has said nothing of the sort.

Departmental Costs

Mr. Thurnham: asked the Chancellor of the Exchequer if there are now any estimated reductions to the estimated running costs of Government Departments listed in his answer of 9 April to the hon. Member for Bolton, North-East, Official Report, column 90.

The Chief Secretary to the Treasury (Mr. Peter Rees): Yes. Provisional outturn for 1983–84 is nearly £70 million less than the estimate published on 9 April.

Mr. Thurnham: I thank my right hon. and learned Friend for his encouraging reply. Has he any further initiatives in mind?

Mr. Rees: Yes, indeed. Various efficiency studies are being carried out by the efficiency unit under Sir Robin Ibbs. The financial management initiative has also been launched, which aims to secure tighter control of running costs, and there is, of course, continuing pressure on Civil Service numbers.

Money Supply and Inflation

Mr. Norman Atkinson: asked the Chancellor of the Exchequer if he will define the relationship between money supply and the rate of inflation.

Mr. Lawson: Experience throughout the world has shown there can be no reduction in inflation without a reduction in the rate of growth of the money supply.

Mr. Atkinson: If money supply reflects the level of demand and both the Chancellor and the Treasury are now saying that inflation is not demand led, but is indeed wage pushed, is not money supply, in the opinion of the Chancellor, merely a barometer? Surely the Chancellor himself does not believe that by adjusting the barometer he can change the weather.

Mr. Lawson: If, as I understand it, the hon. Gentleman is treasurer of the Labour party, I am not surprised that that party has gone bust.
Picking on just one of the hon. Gentleman's errors, it is not at all the position of the Government that inflation is caused by wage push. That is the position of the Opposition Front Bench. The Government's position is that what wage push causes is unemployment, and that is one of our main problems today.

Mr. Dorrell: As my right hon. Friend said that one of the indicators that give him an idea of the monetary conditions in the economy is the foreign exchange rate, does he not think that the fluctuations of recent days in the foreign exchange market reinforce the case for Britain joining the European monetary system?

Mr. Lawson: There are always likely to be fluctuations in the foreign exchange market. The biggest fluctuation in recent weeks and months—indeed over a little longer—has been between the dollar on the one hand and other currencies, European currencies in particular, on the other. That would in no way be affected by joining the EMS.
If one looks at the key currency of the EMS, the deutschmark, which is the linchpin, one can see that during the five years that the Government have been in office the value of sterling against the deutschmark has declined by 5 per cent., whereas during the five years that the Labour party was in office it declined by 36 per cent.

Mr. Wrigglesworth: Does the Chancellor remember claiming that the low interest rates that obtained were a result of his successful economic policies in keeping the public sector borrowing requirement down and stopping crowding out? Will he now accept responsibility for the increase in interest rates, or will he accept that he got it wrong before and that factors other than those of which the Government tried to convince the country affect interest rates?

Mr. Lawson: I have always made it clear that there are a number of factors. It behoves us to control those factors that are within our control. But there has still been a considerable change. When the Government of which the hon. Gentleman was then a supporter left office, British interest rates were 4 per cent. above American rates, and, indeed, that sort of difference has been the historical norm. Today, despite the recent rise in British interest rates, which I regret, they are still marginally below American rates as against the 4 per cent. above when the Labour party left office.

Mr. Yeo: Will my right hon. Friend make it clear that the one thing that is under the control of this Government is the relative level of interest rates against international rates, and particularly North American rates? Does he agree that, without responsible control of the monetary aggregates of this country, interest rates would be much higher than they are in the United States? Does he further

agree that if we were to follow the spendthrift policies advocated by the Labour party and the Alliance, we would face interest rates of close to 20 per cent.?

Mr. Lawson: My hon. Friend is right. If the Labour party's policies were put into operation they would cause us to suffer much higher interest rates than those that we have today. That is not to say that I welcome the present level; I do not. It is higher than is justified by monetary conditions in this country, and I hope that it will not last long.

Mr. Robert Sheldon: Is not the Chancellor's optimism a little misplaced here, given that the earlier exchange rate and interest rate crises under this Government took place against a background of rising North Sea oil output and rising demand for oil and this crisis is taking place against a background of prospective falling North Sea output and falling North Sea oil demand?

Mr. Lawson: This is in no sense a crisis. While I regret the present level of interest rates, which incidentally are still lower than they were for a large part of the Labour Government's period in office, there has been one important development. In the past a level of this sort presented a severe burden to business and industry. Today, however, there has been such a substantial improvement in company liquidity and profitability that, although this is a disappointment to British industry, it will not affect it anything like as much.

Value Added Tax

Mr. Greenway: asked the Chancellor of the Exchequer what items subjected to value added tax in other European Economic Community countries are exempted from that tax in the United Kingdom; and if he will make a statement.

Mr. Ian Stewart: The position varies somewhat between one member state and another, but the proportion of consumer spending subject to a positive rate of VAT in the United Kingdom is one of the smallest in the European Community.

Mr. Greenway: Is my hon. Friend aware that, although before and during the recent Euro-elections my right hon. Friends the Chancellor and the Prime Minister and several others in the House and outside made it c fear that VAT would not be extended to food, the Labour party leadership continued to say in a mendacious way, during and after the elections, that it would be? Will my hon. Friend confirm that the Labour party was completely misleading the electorate in saying that and that there is no question whatever of VAT being extended to food in this country under this Government?

Mr. Stewart: My hon. Friend is absolutely right, both about VAT on food and about the disgraceful and irresponsible behaviour of the Labour party during the European elections, when it constantly tried to assert that the position was not as stated.

Mr. Rooker: In that case, will the Minister confirm that the present VAT regime will be maintained until the next general election?

Mr. Stewart: I am not prepared—[HON. MEMBERS: "Ah."] I am not prepared to give any assurance about future taxation under VAT, income tax or any other form


of taxation. We finished the Report stage of this year's Finance Bill only a few hours ago, and I do not propose to speculate on what may be contained in future Bills.

Construction Industry

Mr. Parry: asked the Chancellor of the Exchequer what representations he has received since he last answered oral questions from employer organisations and trades unions in the construction industry concerning his Budget proposals.

Mr. Peter Rees: My right hon. Friend has received a number of representations from bodies representing the construction industry in recent weeks.

Mr. Parry: The Chief Secretary and the Chancellor will be aware of the concern expressed both by building employers and trade unions in the construction industry. They will also be aware of the massive unemployment rate in the industry. Does he not agree that, in this critical period, the Government should assist the industry rather than attack it?

Mr. Rees: I think that the hon. Gentleman has overlooked the fact that, by abolishing the national insurance surcharge, we shall probably have contributed £20 million in cash to the construction industry in 1984–85, and £60 million in 1985–86.

Mr. Heddle: Does my right hon. and learned Friend agree that there is widespread concern in the construction industry about rumours of a moratorium on capital spending? Will he take this opportunity to deny that rumour?

Mr. Rees: My hon. Friend is right to the extent that preliminary indications suggest a danger of overspending, but the appropriate response has not yet been determined.

Inflation

Mr. Forman: asked the Chancellor of the Exchequer if he will make a statement on the prospective rate of inflation.

Mr. Lawson: I expect inflation to decline further from its present low level of 5 per cent. As my hon. Friend knows, the Government's ultimate objective is stable prices.

Mr. Forman: In view of the recent unwelcome rise in interest rates, which is particularly unwelcome to house buyers and sections of British industry, does my right hon. Friend recognise that it is now even more important to achieve stability in prices, and that the sooner that is achieved the better it will be for our economy?

Mr. Lawson: I agree with my hon. Friend. It will, of course, take some years to achieve that stability in prices, but we are determined to get there.

Mr. Wainwright: Is the right hon. Gentleman aware that commentators and others now agree that there is a serious risk of a rise in the inflation rate this autumn, and that earnings are rising at virtually double the current rate of inflation? Is not the only way of reducing unemployment to start a selective reflation, protected by a decentralised incomes policy?

Mr. Lawson: I know that the hon. Gentleman's view is deeply cherished by the Liberal party, but it is a recipe

for inflation, and for industrial distortions and inefficiencies. The plain fact is that inflation is well on track, although in the short run the RPI will unfortunately be affected by the increase in mortgage rates, which I regret. I hope, however, that the present high interest rates and the increase in mortgage rates will be relatively short-lived.

Mr. Beaumont-Dark: Does my right hon. Friend agree that the plight of sterling has nothing to do with internal factors, and that that is why the 3 per cent. increase in interest rates is an unwelcome response? Does he not agree that it would have been better to encourage the exchange rate to bear the burden and the risk, instead of endeavouring to change a policy that has been so successful on the inflationary front at home

Mr. Lawson: My hon. Friend is, unaccustomedly, slightly mistaken. The pressure was not on sterling. Indeed, as I mentioned earlier, the rate of exchange against the deutschmark has moved only slightly. The pressure was on domestic money market interest rates at home, and it was to that pressure that the clearing banks were forced to respond.

Mr. Ashley: The Chancellor said that inflation was well on track. Can he also say that unemployment is well on track? Having manoeuvred himself into the position of having to choose between inflation and recovery, will he tell us whether he regards mass unemployment as a greater evil than gentle inflation?

Mr. Lawson: Inflation is seldom gentle. I assume that the previous Labour Government sought to achieve the right hon. Gentleman's objective of gentle inflation; but, while they were in office, inflation rose to 26 per cent.—which is anything but gentle—and we have had the task of struggling to bring it down. Not only did the Labour Government see inflation running at that level, but they saw unemployment double. That was not because they wished it to do so, but because they were suffering from the delusion that inflation and unemployment are alternatives to each other, whereas in fact they go hand in hand. One of the key reasons for bringing down inflation is the achievement of conditions in which unemployment can also fall.

Mr. Terry Davis: Let me bring the Chancellor back to what is happening under his stewardship. If he is so confident that the rate of inflation will fall, despite higher interest rates and higher import prices, will he tell us which factors will be involved?

Mr. Lawson: Import prices have not been rising. They have been falling in sterling terms because of the decline in commodity prices. There is also every sign that seasonal food prices, which weigh heavily in the index, will fall. Furthermore, the Government will persist in their firm grip on the money supply, which has brought inflation down to its present level of 5 per cent. and will continue to bring it down.

Manufacturing Output

Ms. Clare Short: asked the Chancellor of the Exchequer if he will estimate the decline in manufacturing output since 1979.

The Financial Secretary to the Treasury (Mr. John Moore): Output in the economy as a whole is at an all-time high. In the three months to April manufacturing output is estimated to have been 10¾ per cent. below its average level in 1979. But this is more than compensated by the fact that output in the rest of the economy is well above its 1979 level.

Ms. Short: Will the Financial Secretary admit that a disastrous consequence of his Goverment's policies since 1979 is that manufacturing output in Britain is still below its 1979 level, and that there can be no real recovery in the British economy without a recovery in manufacturing industry? Does the hon. Gentleman agree that the levels of investment and of imports and exports of manufactures show that the decline is continuing?

Mr. Moore: I am sure that the hon. Lady will recognise that a relative decline in manufacturing is nothing new in the United Kingdom or in the OECD as a whole. I am sure that, in fairness, she would accept that manufacturing employment as a percentage of employment in the United Kingdom was 35 per cent. in 1974 as against 31 per cent. in 1979 and 27 per cent. today. The relative decline in output and employment has continued over a long period.

Mr. Stokes: Is my hon. Friend aware that the decline in manufacturing industry is in part due to strikes—of which there are some at present—which are invariably supported by Opposition Members?

Mr. Moore: My hon. Friend is right to remind the House of one of our basic competitive weaknesses. The tragedy is that since 1975 United Kingdom unit labour costs have risen more than twice as fast as those of our competitors.

Falkland Islands (Airport)

Mr. Dalyell: asked the Chancellor of the Exchequer whether any recent payments have been made from the Contingencies Fund in connection with the construction of the airport in the Falklands.

Mr. Peter Rees: No.

Mr. Dalyell: In that case, who is paying the unforeseen costs of lugging thousands of tonnes of tillite and quarzite rock 8,000 miles from Bristol and Oxford to the Falklands—from the northern hemisphere to the southern hemisphere—for the Margaret Thatcher international airport? Does the Treasury accept The Sunday Times figure of £3 million a day for the Falklands? Where does expenditure on the Falklands come in the Government's list of priorities for this week? Is it sacrosanct?

Mr. Rees: I can reassure the hon. Gentleman that Falklands expenditure is not sacrosanct. The items to which he refers are carried by the Ministry of Defence budget.

Sir John Biggs-Davison: Will not the outlay on the enlargement of the airfield enable military expenditure on the Falklands to be greatly reduced and the islands' economy to be improved?

Mr. Rees: That is indeed our hope.

Mr. Hattersley: Having accepted and answered—I believe uniquely—a question about the use of the

Contingencies Fund, will the Chief Secretary publish in the Official Report how much of the fund has already been used because of the miners' strike, spending by local authorities, an estimated error in the unemployment figures, and other Government over-expenditure?

Mr. Rees: I believe that the right hon. Gentleman is confusing what used to be called the Contingencies Reserve and is now called the Reserve with the Contingencies Fund. The two are quite different.

Mr. Hattersley: rose——

Mr. Speaker: Order. We often get answers that we do not like.

Construction Projects

Mr. Adley: asked the Chancellor of the Exchequer if he will make a statement on the availability of Government guarantees for major construction projects funded by the private sector in so far as they affect the public sector borrowing requirement.

Mr. Peter Rees: No genuinely viable projects in the United Kingdom should require a Government guarantee.

Mr. Adley: Is that not a slightly optimistic answer from my right hon. and learned Friend? Does he agree that, for example, the Channel tunnel project, on which I shall not ask him to comment specifically, can be funded by the private sector, but that it requires political guarantees against cancellation by either the French or British Government now or in the future? Is there not a difference between political and financial guarantees, and does the Treasury recognise that?

Mr. Rees: Yes, we do. My hon. Friend will have noticed that in my reply I specifically said
projects in the United Kingdom
As my hon. Friend will appreciate, the Channel tunnel project will straddle two countries.

Mr. Wainwright: In that connection, will the Treasury now abandon the superstitious practice that anything that has the faintest hint of a Government guarantee is automatically added to the public sector borrowing requirement, and adopt the realistic policy of other developed nations?

Mr. Rees: I hesitate to comment on what other developed nations may do in this regard, but it is, of course, only if the guarantee is called that it becomes a charge on public expenditure.

Borrowing Requirement

Mr. Gould: asked the Chancellor of the Exchequer what has been the extent of over-funding, defined as the extent to which the rate of gilts has exceeded the levels necessary to finance the Government's borrowing requirement over the last three months for which figures are available.

Mr. Ian Stewart: None, Sir.

Mr. Gould: Does the failure to fund the borrowing requirement during the past three months signify a welcome conversion of the Treasury to a more relaxed monetary policy, or is it yet another instance of the Chancellor and the money markets being at cross


purposes? If the latter, when must we expect the inevitable emergence of another Budget, which will impose further cuts on public expenditure?

Mr. Stewart: It is neither of those two things. I am sure that the hon. Gentleman, who is a student of these matters, will know that the PSBR is very heavily front-end loaded this year for normal seasonal reasons, but more particularly because of the withdrawal of postponed accounting for VAT on imports in the autumn. Were the Government to overfund the full extent of the PSBR in the early months of this year, it would produce very heavy distortions in money markets.

Mr. Allan Rogers: Will the Economic Secretary take the opportunity—if not now, later—to correct two statements made by his right hon. Friend the Chancellor of the Exchequer when he misled the House earlier during Question Time?

Mr. Speaker: Order. The question must relate to this particular question, not to previous ones.

Married Man's Tax Allowance

Mr. Squire: asked the Chancellor of the Exchequer whether he now proposes to bring forward legislation reforming the married man's tax allowance.

Mr. Moore: My right hon. Friend has no immediate plans to bring forward legislation.

Mr. Squire: Does my hon. Friend accept, in line with the now aging Green Paper, that this allowance is a relic of a bygone age when the majority of women did not work outside the home? Will he, as a special birthday treat for me today, announce that the £3·25 billion should, instead of its present location, be diverted to assisting the relief of family poverty through increasing child allowance?

Mr. Moore: I am tempted to wish my hon. Friend "Happy birthday" and then to sit down, but I notice from the papers this morning that today is also the anniversary of the birthday of Julius Caesar. I am not sure of the connection with my hon. Friend, but in this context I have to tell him that the Green Paper made it clear that the far-reaching distributive effects of any changes merit serious study. I know that my hon. Friend would want us to take considerable care over this recommendation, however aging he may believe the Green Paper to be.

Mr. Marlow: Would the Government prefer couples to marry or to live in sin? If the former, will my hon. Friend produce a taxation policy that fits the priorities?

Mr. Moore: There is obviously no question as to one's personal preference. There is no evidence that, in practice, many couples choose not to marry, or to get a divorce, to take advantage of the tax rules. However, I recognise the point that my hon. Friend has made and I accept that the present position is open to criticism in a number of respects. That is one of the aspects being studied.

International Debt

Mr. Skinner: asked the Chancellor of the Exchequer what recent discussions he has had with other Finance Ministers regarding international debt and the banking crisis; and if he will make a statement.

Mr. Lawson: The problem of international debt was thoroughly discussed at the London economic summit and is kept under close review.

Mr. Skinner: In view of the tidy mess that the Chancellor of the Exchequer and his colleagues on the Treasury Bench have made of this country's economy, does he really think that he is a fit and proper person to tell the Finance Ministers of Brazil, Argentina and Mexico, with their begging bowls, how to run their countries and get out of difficulties? Will he take my advice and send MacGregor, that financial whizz kid, out there; and if he has any difficulties getting him out of the country, will he shove him in one of those diplomaic bags and get in with him?

Mr. Lawson: The hon. Gentleman will not be surprised to learn that, not for the first time, I do not propose to take his advice.

Manufacturing Industry

Mr. Nellist: asked the Chancellor of the Exchequer when he expects investment in manufacturing industry to return to the level of 1979.

Mr. Moore: Investment in manufacturing industry is recovering strongly. The June DTI investment intentions survey suggests that total non-North sea industrial investment will run close to the 1979 level this year and will set a new record in 1985.

Mr. Nellist: As opposed to the Tory backwoodsman's comments earlier in Question Time, is not the real reason for the decline of the British manufacturing economy that manufacturing investment is less than 80 per cent. of what is necessary merely to cover the depreciation of the machinery that is being worn out? It is not workers who are to blame for the lack of competitiveness with Europe, Japan or America, but the Chancellor's friends in industry and in the banks who refuse to invest in Britain.

Mr. Moore: I know that the hon. Gentleman will not need to be reminded of the wise words of the Wilson committee, that lack of profitable opportunities is the main obstacle to investment. I know that the hon. Gentleman, revelling in good news, will be happy to know that manufacturing investment is strongly rising and is up by 11 per cent. in the six months to March.

Mr. Budgen: Will my hon. Friend confirm that, though there may be disadvantages for other sectors of the economy, manufacturing industry, particularly in the west midlands, will benefit from a lower sterling exchange rate and also from lower oil prices?

Mr. Moore: My hon. Friend is right to draw attention to the reality of the way in which currencies reflect markets and, to the extent that they do and are properly recorded, benefits may accrue to our manufacturing industry.

Mr. Bermingham: Does the Minister agree that the increase in bank rate must perforce affect the amount that industry can invest in new machinery and thus increase investment? Has not the time come for the Government to consider whether there should be differential interest rates, especially where investment is involved?

Mr. Moore: The hon. Gentleman should remember what my right hon. Friend the Chancellor said about the appalling levels of profitability when the Labour


Government were in office. The increase in profitability of industry, combined with the increase in liquidity, ensures that the manufacturing sector, as well as other sectors of the economy, can bear the strain of the current higher interest rates.

Investment (Income Tax Relief)

Mr. Freeman: asked the Chancellor of the Exchequer whether he has received any representations concerning the extension of income tax relief for investment in corporate trades to individuals purchasing shares in a small firm investment company operating with the approval of the Inland Revenue.

Mr. Moore: We have had representations on this from time to time. We have considered these carefully, but we remain unpersuaded of the case for extending the business expansion scheme in this way.

Mr. Freeman: Is my hon. Friend aware of the strong support on the Government Benches for the great success of the business expansion scheme, compared with the almost total indifference on the Opposition Benches to the level and state of private sector capital investment? Will my hon. Friend assure the House that he will consider the CBI proposals for a sensible extension to and change in the business expansion scheme?

Mr. Moore: My hon. Friend is right to remind the House of the success of the business expansion scheme. All hon. Members should welcome the fact that preliminary figures indicate that in 1983–84 approximately £55 million was invested in individual target companies, and approximately 8,000 to 10,000 individual investors were investing in 300 target companies. That shows the success of the scheme already. I shall certainly consider the points made by the CBI in terms of its potential extension.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Alex Carlile: asked the Prime Minister if she will list her official engagements for Thursday 12 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Mr. Carlile: Will the Prime Minister tell the House how much further she expects interest rates to rise before the pound becomes stabilised against the dollar? Will she also tell us what advice she would give to those in business whose investment plans have been scuppered by the stark collapse of her economic strategy?

The Prime Minister: My right hon. Friend the Chancellor of the Exchequer has already said something about interest rates. It is very disappointing that they have had to go up. How long they will stay up depends on the industrial strikes that we are now experiencing. For the 17 weeks of the coal strike we managed to withstand increases in interest rates and hold them well below those of the United States, but, because of the industrial strikes, they have now had to go up.
There is a danger that investment—particularly in small businesses—will be hit. That is one of the most worrying aspects. As for larger concerns, my right hon. Friend has already pointed out that profits are in good shape. Furthermore, the liquidity position of industries is good.

Mr. Fairbairn: Will my right hon. Friend take the opportunity, when Mr. Robert Mugabe visits Edinburgh shortly to receive an honorary degree of doctor of law, to remind him of the civilised characteristic of the law, of Scotland that no man may be detained without trial for more than 110 days? If he accepts the degree, should he not apply that doctrine in his own country?

The Prime Minister: My hon. and learned Friend makes his point extremely well. I am sure that it will be heard in the appropriate quarters.

Mr. Kinnock: Does the Prime Minister realise that the Chancellor of the Exchequer told the nation on television last night that nothing has gone wrong? Does she know that people in the money markets, the banks and the mortgage companies do not believe that? Does she believe it?

The Prime Minister: I think that if the right hon. Gentleman had listened to my previous reply he would have had the answer to that question. Perhaps he was not listening.

Mr. Kinnock: I was listening, and I have heard the right hon. Lady before. Despite the circumstances, she did today what she always does—blame everybody but herself. Is that not what is wrong with this Government and the reason for the rise in unemployment, the mortgage rate increases that are coming, the rises in interest rates, the falling pound and the personal difficulties which people face? When will the Prime Minister pay the price with her own job?

The Prime Minister: If the right hon. Gentleman cares to examine some of the figures about which I have often spoken to him across this Box, he will see that gross domestic product is up 3 per cent. from a year ago, industrial output is up 3.5 per cent., investment is up 10 per cent., productivity per head is up 6 per cent., and profits are up about 25 per cent. I am sure that he will have been delighted to see a very good report this morning about how the steel industry is withstanding its problems. Those are the figures of an economy which basically is in good shape.

Mr. Kinnock: Interest rates have gone up 2 per cent., with no beneficial effect for the British economy.

The Prime Minister: I am well aware of what the right hon. Gentleman says. I remind him that it was the Labour Government who took Britain to the IMF and reduced it to the level of a debtor country. This Government have been paying back the debts incurred by the Labour Government, and we have nearly halved them.

Mr. Baldry: Was not Sir Terence Beckett correct in saying last night that the chief cause of the latest increase in interest rates was external and that the country's underlying position is one of good, steady growth and low inflation? Is it not also somewhat sickening to witness the way in which the Labour party gloats whenever Britain runs into difficulty?

The Prime Minister: Yes. When interest rates go up, it is bad news for Britain and bitterly disappointing. What is even more disappointing is that bad news for Britain is good news for the Labour party—or, at least, that is how it seems.

Dr. Owen: How can the Prime Minister come to the House on Tuesday, claim that the economy is in good shape and, perhaps even more important, that inflation is under control, and, two days later, brazenly defend a situation in which interest rates have risen, the pound has collapsed and we face the prospect of higher mortgage rates? Can the right hon. Lady tell us exactly when she thinks the economy is going to be in bad shape and what is likely to happen to inflation in nine months' time?

The Prime Minister: If the right hon. Gentleman had listened, he would have heard why I said the economy is in good shape. I will repeat it. Compared with a year ago, GDP is up 3 per cent., industrial output is up 3·5 per cent., investment is up 10 per cent., inflation is steady, productivity per head is up 6 per cent., profits are up, and liquidity is good. The right hon. Gentleman was a member of a Labour Government who took this country to the IMF and made it a debtor country and doubled Britain's international debt. I am a member of the Government who have had to pay it back, and we have halved it.

Mr. Montgomery: asked the Prime Minister if she will list her official engagements for 12 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave earlier.

Mr. Montgomery: At some time during her busy day, will my right hon. Friend study the manifestos of the Labour and alliance parties? I note that the Labour party pledged to abolish a tier of local government and to set up unitory authorities and that the alliance pledged to destroy the metropolitan county councils and the Greater London council. Does my right hon. Friend not think it nauseating that those parties should try to make cheap political propaganda out of something that they pledged to do?

The Prime Minister: Yes. I am aware of the two manifestos. The GLC is now responsible for only 9 per cent. of services in London and, under this Government, education will, for the first time, have a directly elected authority.

Mr. John Fraser: What will the Prime Minister do to protect the construction industry from the devastating effect of an increase in mortgage interest rates, which is likely to come about tomorrow, putting those rates about 8 per cent. above the level of inflation?

The Prime Minister: I agree with the hon. Gentleman that it is disappointing that interest rates have risen, and it is particularly disappointing that mortgage rates may go up. The Labour Government suffered from a similar phenomenon. The sooner industrial strikes are over, the quicker the interest rate will go down. I hope, therefore, that the Labour party will start supporting the 23·5 million people who are in work and working well, not the 200,000 who are on strike.

Mr. Andrew MacKay: asked the Prime Minister if she will list her official engagements for 12 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave earlier.

Mr. MacKay: Does my right hon. Friend not feel that it is unfortunate, to say the least, that certain Left-wing Labour-controlled authorities are irresponsibly squandering ratepayers' money by funding striking miners, especially when it takes taxpayers' money to protect those miners who wish to exercise their right in a free society to go to work?

The Prime Minister: We pay for the coal industry in many ways. The taxpayer pays in heavy subsidies when the coal industry is running, but the taxpayer and the ratepayer pay when the coal industry is on strike.

Mr. Dixon: Will the Prime Minister explain to people outside the House the justification for the legislation brought in by the Government which means that the dependants of the Yorkshire Ripper, who is in gaol for the protection of society, are cared for better by the Government than the dependants of a Yorkshire miner who is on strike in defence of his community? Will she also explain to the public why the wives and children of murderers are cared for better by the Government than the wives and children of strikers?

The Prime Minister: I have heard the answer given many times. The miner who is on strike has a very good job, should he choose to return to it.

Mr. Meadowcroft: asked the Prime Minister if she will list her official engagements for Thursday 12 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Meadowcroft: Is not the inexorable outcome of the recent trend in inflation exacerbated by yesterday's increase in interest rates? There is bound to be a rate of inflation of 7 per cent. by December. Given that the stated objective of the Government is a reduction in inflation, what credibility will they then have?

The Prime Minister: I should point out to the hon. Gentleman that inflation is at its lowest rate on an annual average for 15 years. That is far lower than the rate current during the life of the Labour Government, who his party supported and attempted to keep in office. The effect upon inflation will depend on how long interest rates have to stay up. I hope that that will not be for too long, but it will depend to some extent on how quickly industrial strikes are ended and people return to work. There are good jobs waiting. The irony is that workers who are among the most highly paid in Britain are on strike and damaging the prospects of the 23·5 million of those who are in work.

Mr. Stern: Will my right hon. Friend take a moment in the course of her day to remind Labour-controlled local authorities that, in the settlement arrived at in Liverpool this week, there is naught for their comfort in continuing to overspend?

The Prime Minister: Yes. I note that the Liverpool city council decided to reduce its expenditure substantially by about £38 million, which is a reduction of 15 per cent. I note that that has been held up as a tremendous victory by the Opposition. I wonder what they would say if the Government brought in a reduction of 15 per cent. in public expenditure. Perhaps for the first time they would support us.

Mr. Hardy: Is the Prime Minister aware that over three quarters of the 1983 school leavers in the Rotherham


metropolitan area are still without work and that those now leaving school face an even worse prospect? How can she tell those young people that the economy is in good shape?

The Prime Minister: Because of the figures that I have given. As the hon. Gentleman will be aware, the numbers in work are going up, but I am afraid that that is not having a great effect on reducing the numbers on the unemployment register. For reasons which the hon. Gentleman will knows, over the past six years the working population has risen by 1 million and it will continue to rise because of the number of school leavers until about 1989. In the meantime, I point out to the hon. Gentleman that every school leaver is guaranteed a place on the youth training service. Indeed, there was a surplus of youth training service places over the numbers who were demanding them last year.

Mr. Thurnham: asked the Prime Minister if she will list her official engagements for Thursday 12 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Thurnham: Will my right hon. Friend assure law-abiding trade unionists that it is the law of Parliament which prevails, not that of comtemptuous kangaroo union courts?

The Prime Minister: Yes. The law is made by a democratically elected Parliament, administered by a totally independent judiciary, and it should be upheld.

Mr. James Lamond: Does the Prime Minister recall her rather anti-American outburst at the Dispatch Box on 8 December last year when she said that American financial policy was extremely damaging to our economy and that in future great danger would arise from it? Is this the point at which our economy has been extremely damaged and is this the great danger about which she was speaking?

The Prime Minister: As the hon. Gentleman is well aware, we have managed for some time to keep our own interest rates well below those in the American markets. Right now they are just about the same. If the hon. Gentleman thinks that it is damaging to raise interest rates, he himself has made the point.

Mr. Kirkwood: asked the Prime Minister if she will list her official engagements for 12 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave earlier.

Mr. Kirkwood: Are there any circumstances in which the Prime Minister foresees herself authorising further public expenditure cuts in the autumn?

The Prime Minister: We are at the time of the year when we look at public expenditure for the coming year. As I had hoped the hon. Gentleman would know, a

statement was made when we last considered the matter. We intend to hold to the public expenditure totals already published.

Mr. Barron: asked the Prime Minister if she will list her official engagements for Thursday 12 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave earlier.

Mr. Barron: I invite the Prime Minister to answer the question that was asked earlier and to tell the House why the families of striking miners have £15 a week deducted from any supplementary benefit that may be available to them when the families of people in gaol do not have that sum deducted.

The Prime Minister: That is the law that was passed through this House by a democratically elected Government.

Questions to Ministers

Mr. Chris Smith: On a point of order, Mr. Speaker. In reply to a question I asked earlier, a Treasury Minister seemed to many hon. Members to give a response which prejudged a decision that the courts might be called upon to make about the nature of material held by Customs and Excise. Will the Minister read in the Official Report the text of what he said and perhaps seek your indulgence, Mr. Speaker, to correct it in the House tomorrow if he wishes to do so?

Mr. Speaker: I was also listening carefully, as I always do to matters that may be sub judice. I did not hear anything in the Minister's reply that was sub judice.

Mr. Alex Carlile: Further to that point of order, Mr. Speaker. The hon. Member for Christchurch (Mr. Adley) used the word "obscene" to describe certain items seized by Customs and Excise from a book shop. Will you look at the Official Report, Mr. Speaker, and ask the hon. Gentleman to withdraw the word "obscene"?

Mr. Speaker: Order. I think that the word is frequently used—but not, I hope, too frequently. I shall look to ensure that all is well.

Mr. Dennis Skinner: I know that during Question Time and when calling people generally, Mr. Speaker, you attempt to ensure that the people who are called are many and varied and represent all sections of the House. On this important day, when there is crisis all around us, I wonder why you did not manage to catch the eye of the right hon. Member for Cambridgeshire, South-East (Mr. Pym), the leader of the faction that is trying to——

Mr. Speaker: Order. I thank the hon. Gentleman for the compliment which he seeks to pay me. I can call only those who rise.

Business of the House

Mr. Neil Kinnock: Will the Leader of the House state the business for next week?

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business for next week will be as follows:
MONDAY I6 JULY—There will be a debate on the Gower report, Cmnd. 9125, on the review of investor protection in the financial services sector, on a motion for the Adjournment of the House.
Motion relating to the Value Added Tax (General) (Amendment) (No. 2) Regulations.
Motion on the Appointment of Bishops measure.
TUESDAY I7 JULY—Estimates Day (3rd Allotted Day).
The Estimates for consideration will appear in the Official Report. There will be a debate on Estimates relating to the United Kingdom diplomatic representation in the Commonwealth Caribbean and aid to Grenada, followed by a debate on Estimates relating to the Property Services Agency.
The Question will be put on all outstanding Votes and Estimates.
Motions relating to the Public Telecommunication System Designation Orders.
WEDNESDAY I8 JULY—Motions on the Rate Support Grant Supplementary Reports for England and Wales.
Motion on the Dairy Produce Quotas Regulations.
THURSDAY I9 JULY—Motions on orders and regulations on social security uprating of benefits, and on the Pensioners' Lump Sum Payments Order.
Remaining stages of the Capital Transfer Tax Bill [Lords] which is a consolidation measure.
FRIDAY 20 JULY—Motion on Members' car mileage allowance, and on office, secretarial and research allowance.
Motion on the Lord Chancellor's Salary Order.
Motions on the European Community Document 5064/84 on the withdrawal of Greenland from the Community, and 4692/81 and 4465/84 on the Right of Establishment—Pharmacist.
MONDAY 23 JULY—Opposition Day (19th Alloted Day)—the topic for debate to be announced.

[Estimates Day (3rd Allotted Day)

1. Class II, Vote 1 (Overseas Representation:

Diplomatic, Consular and other Foreign and Commonwealth services)
Subhead A1 (Salaries)

Class II, Vote 8 (Overseas Aid)

Subhead C1 (Loans: allocated)
Subhead C2 (Grants: allocated)
Subhead D1 (5) (Service overseas and regional technical co-operation programmes: Caribbean and Pacific.)

2. Class XIV, Vote 1 (Civil Accommodation Services) (PSA of the Department of the Environment)

Subhead A3: Maintenance and Running Costs
Subhead C1: Acquisitions and New Works costing over £100,000

Class XIV, Vote 2 (Administration and Miscellaneous Services) (PSA of the Department of the Environment)

Subhead A2: General administrative expenses.

Debate on the Estimates in Class II to be concluded not later than half-past seven o'clock.]

[Debates on European Documents on 20 July Relevant Documents:


(a) 5064/84
Withdrawal of Greenland from the Community


(b) 4692/81
Right of Establishment—


4 4 6 5/ 8 4 Pharmacists

Relevant reports of European Legislation Committee:

(a) HC 78-xv (1983–84) para. 1.
(b) HC 78-xxvii (1983–84) para. 1.

Mr. Kinnock: In view of the speculation in the press about the reorganisation of the Ministry of Defence, will the Leader of the House give us an assurance that the Secretary of State for Defence will at an early date make a statement to the House on that subject?
Further on the subject of defence, will the right hon. Gentleman inform the House when we can expect the three Services day debates? If they cannot take place before the recess, may we have his assurance that they will take place at an early date after the House returns from the recess in the autumn?
The right hon. Gentleman will be aware that only one and a half hours after 11.30 pm have been allocated for the debate on the milk regulations next Wednesday. As it is likely that a large number of Members want to voice an opinion on this very important matter, will he undertake to extend the time allotted to discussion of the regulations?

Mr. Biffen: Of course we shall be very happy to consider, through the usual channels, whether there should be an extension to the proposed one and a half hours debate on the milk regulations on Wednesday because we recognise the widespread interest in the topic.
May I also confirm that it is our intention to have the Services day debates as early as is feasible after our return in the autumn? Of course, I take account of the importance of the statement on any reorganisation being made by my right hon. Friend the Secretary of State for Defence.

Sir Kenneth Lewis: The Leader of the House will be aware that the Government's programme is subject to what is happening in another place and to certain amendments which will come from there. Is the date when we rise for the summer recess also dependent on what happens in another place? If not, will he tell us why we cannot be told today, in reasonable time, so that those Members of the House who have children will know whether we shall finish at the end of July or go into August?

Mr. Biffen: I would sooner give a reliable judgment than a speedy judgment. Therefore, I have not this afternoon made a statement about the recess dates, but I realise that a statement will be expected of me next week.

Mr. J. Enoch Powell: In connection with the Appointment of Bishops measure to be debated next Monday, is the right hon. Gentleman aware that I have represented to him the desirability of a Government statement on the measure in view of the signification of the Queen's consent to it?

Mr. Biffen: Yes. That is under sympathetic consideration.

Mr. A. J. Beith: Will the Leader of the House recognise how important it is to give more time to debate the milk regulations? Will he


recognise, too, how difficult it is for the Chair to call Members according to the conventions of the House when the areas most affected are represented either by discontented Members of his own party or by Members of the Liberal party and not by those on the Labour Benches?
Incidentally, which party will the right hon. Gentleman be inviting to choose the topic for debate on the 19th Allotted Day? Will it be another life support job for the Labour party?

Mr. Biffen: May I say how much I deprecate any talk of discontented Members on the Conservative Benches. Therefore, I assure the hon. Gentleman that, in the mood of fraternity that overtakes this House in July, we shall certainly consider the question of an extension of the debate on the milk regulations.
Finally, the hon. Gentleman knows perfectly well of the procedures of the House under which the debate will take place on Monday 23 July. I can say no more on that.

Mr. Robin Maxwell-Hyslop: As the coming weekend will be the only opportunity for right hon. and hon. Members to discuss with their constituents the final version of the milk quota regulations before the House takes a decision, will my right hon. Friend ensure that that information will be available at the Vote Office before the House rises today? Will he also ensure that a statement is made before the House considers the milk quota regulations about whether outgoers payments will be tax free?

Mr. Biffen: I accept the importance of the points raised by my hon. Friend and will see what can be done.

Mr. D. N. Campbell-Savours: May we have an emergency debate on the economic crisis?

Mr. Biffen: With a degree of ingenuity, that might just about be squared with the Third Reading of the Finance Bill.

Sir Geoffrey Finsberg: In the same spirit of fraternal greetings that my right hon. Friend spoke about, will he accept that there are many contented right hon. and hon. Members who may not feel the need for an extension of the debate on the milk regulations?

Mr. Biffen: It is my job to refer such matters to the usual channels rather than try to be an arbiter on the Floor of the House.

Mr. George Foulkes: Does the Leader of the House recall that more than two years ago the House was preoccupied week after week with the future of the Falkland Islands? When will the House have the opportunity to discuss positively the future of the Falkland Islands and the possibility of the restoration of normal relations between Britain and Argentina?

Mr. Biffen: The hon. Gentleman will appreciate that that matter is not in the business announced for next week, but we shall soon have the chance to debate matters that arise in relation to the Consolidated Fund Bill and he may like to try then.

Several Hon. Members: rose——

Mr. Speaker: Order. I realise that business questions represent precious Back-Bench time, but we have three statements and an important debate to follow, so I shall limit business questions to 3.50.

Mr. Albert McQuarrie: The debate on car mileage, secretarial and research assistance allowances will take place on Friday. That causes considerable anxiety to right hon. and hon. Members who have previous engagements for next Friday and will be unable to take part in that important debate. Therefore, can he arrange for the debate to take place on a day other than next Friday?

Mr. Biffen: Obviously I have much sympathy with my hon. Friend, and in an ideal world the debate would take place during the week in prime time. But similar business has often been debated on a Friday. At this time of year, time is at a premium, so that the debate must stand.

Mr. Eddie Loyden: Has the Leader of the House been able to give further consideration to the point that I raised previously on business questions? I refer to the need for an early debate on drug abuse. The right hon. Gentleman conceded that it is a very serious matter. The House should be given an opportunity to discuss it and to reach a decision on the action to be taken.

Mr. Biffen: I have a feeling that the hon. Gentleman may find that the debate which is to take place this Friday will offer him an opportunity to discuss that matter.

Mr. John Townend: Will my right hon. Friend take note of early-day motion 812 which calls for the abolition of wages councils?
[That this House views with great concern the detrimental effect that wages councils have on the free working of the labour market and in particular the loss of job opportunities for young people; believes that the ending of such restrictions will enable the cost of labour to move to market levels and thereby create new jobs; and therefore calls on Her Majesty's Government to abolish wages councils as soon as its international commitment allows.]
It has been signed by 111 Members. Is he aware that it has been signed by the chairmen of the Back-Bench finance, trade and industry and small business committees? Will the Government make an early statement about their attitude to the future of wages councils?

Mr. Biffen: I shall draw that point to the attention of my right hon. Friend the Secretary of State for Employment.

Mr. Jack Ashley: I refer to a different aspect of the drug problem. Is it not a matter for deep concern that some senior civil servants who advise on the safety of medicines choose to move from their Department to the drug industry? Some of those firms are less than careful about drug safety. Many Members of Parliament are paid by the drug industry for advice. Therefore, is it not time to have a full discussion about what is happening in the drug industry?

Mr. Biffen: If the right hon. Gentleman wishes to develop those allegations of impropriety, the debate tomorrow will be a most appropriate occasion on which to do so.

Mr. Edward Leigh: Is my right hon. Friend aware that, although the cows in the London borough of Hampstead may be contented, they certainly are not contented in the rural county of Lincolnshire, and that Lincolnshire Members would favour a longer debate on the milk regulations?

Mr. Biffen: I note what my hon. Friend says. As I said in reply to the Leader of the Opposition, this is a matter for further consideration.

Mr. Don Dixon: Has the Leader of the House seen early day motion 867 standing in my name and in those of my hon. Friends about a national maritime policy, bearing in mind that since 1979 this country has lost more than 30,000 British seafarers' jobs and more than 30,000 shipbuilding jobs, and that as an island nation we cannot allow that to go on?
[That this House, concerned at the loss of 30,000 British seafarers' jobs since 1979 and also the loss of over 30,000 jobs in the shipbuilding, ship repair and marine engineering industry, and recalling that nearly 100 per cent. of the United Kingdom's exports and imports are carried in ships and because shipping, shipbuilding, ship repair and the marine engineering industry still employs nearly 290,000 people, believes that, as an island country, the United Kingdom must retain a ship owning, shipbuilding, ship repair and marine engineering capability, and that that industry must have political and financial support during the current world recession; and therefore calls upon Her Majesty's Government urgently to establish a Cabinet Committee and appoint a Minister of Shipping to oversee and co-ordinate a national maritime policy.]
Will the right hon. Gentleman arrange an urgent debate to discuss a maritime policy for this country, because we must be the only maritime nation that does not have one?

Mr. Biffen: As I said, the week after next there will be generous opportunities for Back-Bench initiatives in debates, and I recommend the hon. Gentleman to try his hand then.

Mr. Richard Hickmet: Has my right hon. Friend seen the annual report of the British Steel Corporation, and is he aware of the substantial improvement in that concern's economic performance—an economic improvement that was masterminded by Mr. MacGregor? Will he find time for a debate on the improvement in the financial operations of the corporation and the lessons that can be learnt from that by the coal mining industry?

Mr. Biffen: No provision has been made for a debate in Government time in the business that I have just announced, but I shall certainly bear in mind my hon. Friend's observations, particularly as they demonstrate a remarkable success in the industry.

Mr. Laurie Pavitt: As the Medical Research Council today reached an agonising decision about cutting £2 million from next year's research projects on breast cancer, cot deaths and rheumatoid arthritis, will the Leader of the House arrange for the Secretary of State for Education and Science to come to the House next week and make a statement so that hon. Members may consider ways in which the matter can be redressed?

Mr. Biffen: I shall certainly draw the matter to the attention of my right hon. Friend the Secretary of State for Education and Science.

Mr. John Stokes: Can my right hon. Friend give an assurance that he will not hesitate to come to the House next week to announce any measures that may be necessary as a result of the dock strike?

Mr. Biffen: Certainly.

Mr. Ron Lewis: Are we to assume from the reply that the right hon. Gentleman gave to my hon. Friend the Member for Jarrow (Mr. Dixon) that there will be ample time for hon. Members to have a discussion? Are we to assume that the House will rise for the summer recess after next week?

Mr. Biffen: No. That is a jolly good try, but I am not prepared to have finessed from me the expected date of the recess. In the Back-Bench debates that are normally associated with the Consolidated Fund there will be an opportunity for the House to have the maritime debate that was mentioned.

Mr. Tim Yeo: In view of the plaintive cries from the alliance Benches about the allocation of time, the frequency of which is exceeded only by requests for the introduction of proportional representation, does my right hon. Friend agree that there is a valuable opportunity to experiment with PR through the allocation of parliamentary time to minority parties in proportion to their representation in this House?

Mr. Biffen: Of course, that would initially be a matter for consideration by the Procedure Committee and the House generally.

Mr. Allen McKay: Does not the Leader of the House consider that we should at last have a debate on this country's industrial problems? Does not he realise that we have a mining strike, that there is the possibility of a steel strike now that the dock strike is beginning to bite, and that other trade unions could follow suit? Does not he accept, irrespective of the gloss that the Prime Minister puts on it, that the situation is serious? As we are coming up to the recess, although the right hon. Gentleman has not yet announced it, will he tell us whether it is his intention to have a debate on those problems, or will he recall the House if things get worse during the recess?

Mr. Biffen: The hon. Gentleman has made that point on a number of occasions in recent weeks. This afternoon's debate on the Third Reading of the Finance Bill is about the economy. All the factors that he mentioned have an intimate relationship with the economy, and I should have thought that, without too much ingenuity, one could make the speech then.

Mr. Michael Stern: Is my right hon. Friend aware of the imminent publication of the report from the Overseas Development Administration on the official inquiry into the fire at King Edward memorial hospital, Port Stanley? In view of the widespread interest in the report on both sides of the House, will my right hon. Friend consider finding time for a debate on the report before the recess?

Mr. Biffen: I think that the normal convention is to await the Government's response to such a report. Perhaps it would be best if we followed that procedure.

Mr. Peter Pike: Will the Leader of the House recognise that the concern felt by local government about a possible moratorium on local government spending, on housing in particular, will have only been added to by an answer given earlier? Does he accept that


it would be wrong for such a moratorium to be announced during the recess? Will he arrange for a statement and for a debate, if appropriate, before the recess?

Mr. Biffen: In no sense do I wish to confirm the premise on which the hon. Gentleman is asking that question, but I shall draw the attention of my right hon. Friend the Secretary of State for the Environment to the anxieties to which the hon. Gentleman has drawn attention.

Mr. Umaru Dikko

The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe): With permission Mr. Speaker, I shall make a further statement about the abduction of Mr. Umaru Dikko.
I told the House on 9 July that police inquiries were continuing. As a result of these inquiries four men, three Israeli nationals and one Nigerian national, have each been charged with kidnapping—a common law offence—and with administering drugs with intent to kidnap. They have been remanded in custody.
The police inquiries also disclosed evidence which appeared to implicate members of the Nigerian high commission. It was in those circumstances that, as I told the House on Monday, the Nigerian high commissioner was asked to allow the police to interview members of the Nigerian high commission staff. I have to inform the House that the Nigerian Government declined to comply with this request.
Accordingly, the high commissioner was seen again yesterday. He was told that we had noted the Nigerian Government's denial of any involvement in Mr. Dikko's abduction. However, in the light of the circumstances that I have described, he was told that a counsellor, Mr. Peter Oyedele and an attaché, Mr. Okon Edet, must leave the country within seven days, that is, by next Wednesday 18 July. The high commissioner stated that his Government were recalling him for consultations. He has now left the country.
I am sure that the whole House will join me in expressing the hope that these events will not inflict lasting damage to our long-term relationship with Nigeria, a Commonwealth country with which we have had good relations over many years.
The present situation is not of our making, but, as I have made abundantly clear in earlier statements to the House, Her Majesty's Government are bound to take the gravest view of any evidence which appears to implicate members of diplomatic missions in serious crimes in this country.

Mr. George Robertson: The Foreign Secretary is right to underline the seriousness of the incident as well as the importance of maintaining British-Nigerian relations, not just because of the trade between our countries, but because we are long-standing Commonwealth partners. It is equally important that we make it clear that this country will not, in any circumstances, allow the import on to our streets of other countries' quarrels, whether or not covered by diplomatic immunity. The message from this country and the House to the Nigerians or to anyone else who is aggrieved must be this: use courts, not crates.
Nigeria has endangered relations by protesting official innocence while, at the same time, illegally holding the British Caledonian jet and refusing to waive immunity for people to be questioned. However, if President Buhari is correct—perhaps we should give him the benefit of the doubt — we should demand full co-operation in a continuing joint investigation to establish precisely who organised the finance and carried out the deplorable, outrageous and illegal act. We should expect him to assist in ensuring that the perpetrators are quickly brought to justice.
I have two additional questions. The Nigerian accredited mission to Britain is 122 strong, which is larger than that of either the Soviet Union or the United States of America. In the light of the Libyan episode and what was said after that, why was the mission allowed to grow to such a vast and disproportionate size, with all the attendant problems?
Secondly, on Tuesday evening, BBC radio broadcast regular reports that British intelligence had had prior knowledge of a possible abduction but had not informed Scotland Yard. Despite that, Scotland Yard acted with inspired success in this instance. However, as the reports mysteriously disappeared from the radio and newspapers on Wednesday, will the Foreign Secretary confirm their truth? It would be intolerable if inter-agency rivalries were to inhibit the pursuit of international criminals, and it is the responsibility of Ministers to ensure that they do not.
Finally, I ask—as I did on Monday—whether the Foreign Secretary will seriously consider a Commonwealth initiative on diplomatic baggages.

Sir Geoffrey Howe: I am grateful to the hon. Gentleman for what he said at the outset about the serious view which the whole House takes of the events. He also spoke of the importance which we attach to long-term relations between this country and Nigeria. I do not doubt that the strength of the message presented by the Government and underlined by the House—namely, that we will not tolerate illegal behaviour which represents a possible violation of diplomatic immunity—will have been underlined by the hon. Gentleman's remarks.
The hon. Gentleman asked about the prospect of further co-operation in the investigation of the offence. I told the House of our request and the response received. I take account of the hon. Gentleman's further request in that respect, but he must take into account the reply that we received.
The hon. Gentleman drew attention to the size of the Nigerian high commission. It must be remembered that other missions here also have substantial staff. I speak not only of nearby countries. India—another large Commonwealth country—has a significantly larger staff here than has the Nigerian High Commission. A further factor to take into account is that approximately 70,000 Nigerians are in this country.
However, I shall certainly examine the size of missions here, in the light of my statement to the House on 1 May.
The hon. Gentleman mentioned the possibility of a Commonwealth initiative on terrorism, a matter which was raised in questions on my statement on Monday. I have undertaken to consider that matter. It will, of course, take its place alongside the other initiatives that we are already taking in the European Community and took at the economic summit.
The hon. Gentleman also inquired about intelligence reports which were apparently broadcast on the radio on Tuesday or Wednesday night. In a sense, he answered his own question by drawing the House's attention to the fact that those reports disappeared. Ever since the change of Government in Nigeria it has been common knowledge that the new Government were interested in the return of several people from our country, including Mr. Dikko. However, we were not aware of a specific threat to him.

Mr. Mark Carlisle: In view of my hon. and learned Friend's remarks about Nigeria being a member of the Commonwealth, and in view of the Nigerian Government's insistence that they were not involved in the incident, will he tell the Nigerian Government that their statement is bound to be weakened in the eyes of many if they refuse to allow members of their diplomatic mission to be interviewed?

Sir Geoffrey Howe: My right hon. and learned Friend is, of course, absolutely right. Indeed, that point was raised in the House when my right hon. and learned Friend the Home Secretary made his statement on Friday of last week, and it was drawn to the Nigerian Government's attention during the exchanges which took place this week.

Mr. Malcolm Bruce: I acknowledge that the incident to which the statement relates is sensitive and embarrassing to both the British and Nigerian Governments. However, perhaps the Foreign Secretary will recognise that two of my constituents have been detained in police custody in Lagos for seven weeks—without having been charged or bailed—in respect of supposed offences of servicing an aircraft which subsequently broke the embargo. Will he give me an assurance that he will recognise that their release and early bail is a high priority and that this particular development will not be allowed to prejudice their circumstances?

Sir Geoffrey Howe: I am glad that the hon. Gentleman has taken this opportunity to remind the House once again of that matter. As he knows, representations in respect of these two detainees have been made at ministerial level and on several other occasions by our high commission in Lagos. No charges have been preferred against them and their continued detention is quite unjustifiable. I am glad to say that the high commission has regular consular access to them, and certainly we shall continue to press the point that the hon. Gentleman has made.

Mr. Ivor Stanbrook: If the Commonwealth means anything, it means that its other members are entitled to extra sympathy and understanding of their problems and the benefit of the doubt if they make mistakes. Is my right hon. and learned Friend aware that Nigeria is not Libya, that General Buhari is not Colonel Gaddafi, and that not a single life has been lost due to the current military regime in Nigeria? Some stupid people have taken the law into their own hands, but, my right hon. and learned Friend knows, as well as do most people in Nigeria, and perhaps in this country, that the Nigerian Government had good reasons for wanting the return of Alhaji Umaru to Nigeria. Will he not be so heavy-handed in dealing with friends, and distinguish more carefully between friends and enemies?

Sir Geoffrey Howe: I well understand the basis of my hon. Friend's points and, as I indicated earlier, I also understand the extent of the anger in Nigeria about the previous conduct of certain Nigerian nationals now present in this country. However, having said that, and having recognised the importance of maintaining good relations between this country and Nigeria in the long term, it would not have been possible to treat the events of last week as though nothing had happened. I am certain that my announcements carry the support of the whole House, regretful though it must be to have to make them.

Mr. John Fraser: Without in any way condoning what has happened, will the Foreign Secretary recognise the concern of many thousands of Nigerians, who live frugally and sometimes precariously in this country, about the filching of hundreds of millions of pounds from Nigeria by former Cabinet Ministers? Will the Foreign Office therefore offer every possible facility to a Third world country to have repatriated to it funds which may have been illegally lodged in this country?

Sir Geoffrey Howe: However much one may understand the force of the hon. Gentleman's point, it is not possible for the Government to make such arrangements. If people in this country are wanted back in their own country—for instance, Nigeria—for the investigation of offences, it is, of course, open to the Nigerian Government to make an application under the Fugitive Offenders Act, but no such application has been made.

Sir Anthony Kershaw: Is my right hon. and learned Friend aware that this interruption in the very good relations with a great and friendly Commonwealth country is to be much deplored, but was it not impossible for him to overlook the matter? Will he bring home to the Nigerian Government the fact that if we had more confidence in the way in which their judicial system is working, extradition might be a proper way for them to proceed?

Sir Geoffrey Howe: My hon. Friend is right to underline that point, but, notwithstanding our concern for relations between our two countries, it would not have been possible to overlook the events that occurred. Extradition under the Fugitive Offenders Act is, of course, an option open to the Nigerian Government. In hearing any application made under that Act the courts would, of course, consider the merits in all respects.

Mr. John David Taylor: As the Foreign Secretary must have had good reason to request the departure of two officials of the Nigerian high commission, does he believe that they were acting on their own initiative, or on behalf of the Nigerian authorities?

Sir Geoffrey Howe: It is not possible for me or anybody else to give a firm view about such understandable questions. As I have said, the Nigerian Government have denied responsibility, but, without the police authorities being able to question members of the high commission, it has not been possible for us to carry the matter to a conclusion.

Mr. Dennis Walters: Bearing in mind that three of the arrested kidnappers were Israeli citizens, one of whom is a prominent doctor in Israel, and the fact that only last week the Israeli Government were involved in an act of piracy on the high seas, is my right hon. and learned Friend entirely satisfied that there is no Israeli Government involvement?

Sir Geoffrey Howe: The position today is the same as it was when I was asked that question on Monday. There is no evidence of Israeli Government involvement.

Mr. Tam Dalyell: Given the various shades of grey in the Dikko case, and the issue of political asylum, is this an occasion on which we should consider very strongly British self-interest, as, indeed, the French and Germans would consider their self-interest in similar circumstances? Is it not a fact that we do as much trade

with Nigeria as with almost the rest of Africa put together? In the past British Leyland at Bathgate depended on Nigeria, and its successor might well depend on engine and truck exports to Nigeria again. I make no apology for putting this point, because thousands of jobs are involved. Can this be constantly borne in mind?

Sir Geoffrey Howe: That point has been taken fully into account in reaching the decision that I have announced to the House. The hon. Gentleman need make no apology for what he has said. This country has wide-ranging and long-standing trading relations with Nigeria. On those trading relationships depend jobs in this country and the prospect of prosperity for Nigeria. Having said that, one has to say that it is not possible to behave as though the events of the last seven days did not happen. I hope that the hon. Gentleman's observations about the importance of trading links will be borne in mind by him and other Opposition Members with regard to trading links with other countries.

Sir Frederic Bennett: As there have been several references to extradition being an alternative method of obtaining the return of Mr. Dikko to Nigeria can my right hon. and learned Friend say whether there are any alleged grounds which come within our extradition law which the courts would enforce? I am sure my right hon. Friend will agree that it would be wrong for us to give the impression that if the Nigerian's were to go for extradition it would be allowed, irrespective of the decision of our courts.

Sir Geoffrey Howe: There can be no question of any such special prior indication. I told the House on Monday, and I did so again today, that no application has been received under the Fugitive Offenders Act 1967 for the extradition of any persons. We are aware of a stated intention by the Nigerian Government to seek the extradition of Mr. Dikko and others. Any request received in proper form will be considered on its merits in accordance with the provisions of the statute.

Mr. John Home Robertson: The Foreign Secretary told the House on Monday that Mr. Dikko had the status of a temporary visitor in the United Kingdom. What future has that status, in view of the fact that he could face perfectly legitimate legal proceedings in Nigeria?

Sir Geoffrey Howe: It is not for me to answer for Mr. Dikko's reasons for being in this country. He was admitted as a visitor, as I told the House on Monday, together with a large number of other Nigerian nationals.

Sir Dudley Smith: In view of this and other happenings, does my right hon. and learned Friend gain any impression that our European partners and, indeed, other countries of the free world are sympathetic to the idea that the Vienna convention ought to be modernised and widened?

Sir Geoffrey Howe: I have no doubt that our European partners and those countries represented at the London economic summit take a very sympathetic view of the case that we have been making for the closest possible study, not only of the Vienna convention, but of the other measures which the countries of the world need to take together to prevent abuse of diplomatic immunities. We are still conducting our review of the Vienna convention, as, indeed, is the Foreign Affairs Committee. The House


must recognise that it is not just the convention, but the way in which it is, and the extent to which it can be enforced that is important.

Mr. Ron Brown: In view of the kidnap bids, the House still needs to know why Mr. Dikko and other Nigerian crooks were made welcome in this country, bearing in mind that many genuine refugees, particularly from Pakistan, are repeatedly turned away from these shores.

Sir Geoffrey Howe: All people who come to this country are dealt with by the immigration authorities in accordance with the relevant legislation applying to their status. The Nigerians of whom I have spoken are in this country as visitors. I told the House on Monday, I think, that Mr. Dikko was here as a visitor for six months from a date in June.

Mr. W. Benyon: It will take years to renegotiate the Vienna convention, and the British public are thoroughly fed up with what is going on. Will the Government consider unilaterally abrogating those parts of the Vienna convention which deal with diplomatic baggage?

Sir Geoffrey Howe: I must tell my hon. Friend that the matter is not as simple as that and should not be so regarded. The Vienna convention was not introduced as a diplomatic nicety or for the protection of diplomats of this or any other country. Its provisions are often necessary for the protection of British interests. Around the world, British interests are formidable. This country has always has always lived by trade and for many years has sent its citizens to work abroad. There are more than 5 million British citizens outside this country engaged on work from which we all benefit. The problem is to reconcile those interests and the need to protect them, through our own diplomatic service, from the manifest abuses which can sometimes take place. It is for that reason that I announced the very strong attitude that this country will take to any violations of the convention that are detected.

Mr. Andrew Faulds: In view of the massively corrupt practices of Mr. Dikko and other such characters still in Britain, would it not be advisable for the Government to review the arrangements under which such gentlemen seem to put down roots, by purchasing properties worth £500,000 in some cases? Are they purchasing such properties in the likely event of a six months' stay?

Sir Geoffrey Howe: The hon. Gentleman has drawn attention to a problem which deserves very serious consideration. As I said in the House on Monday, his right hon. Friend the Member for Morley and Leeds, South (Mr. Rees) in a broadcast interview on Monday, I think, expounded the difficulties that would be involved if we fundamentally changed without very careful thought the basis on which people who come to this country are allowed to remain here. I accept the hon. Gentleman's point. The problem is changing in nature and growing. The matter deserves very close study, but it would not be right to jump to swift or dramatic conclusions in the belief that it is an easy one.

Mr. Eldon Griffiths: Is my right hon. and learned Friend aware that what has been revealed

by the Nigerian diplomatic kidnap as by the Libyan diplomatic murder, has done no more than lift the veil from the diplomatic lawlessness which is not uncommon among certain embassies in London? Many people have very little confidence that the Foreign Office is dealing with the problem effectively.
The cipher is the only part of an ambassador's diplomatic baggage which must be kept absolutely inviolate. Will my right hon. and learned Friend take steps to ensure that steamer trunks, crates and containers which too often carry items as booze and arms— and now people, as we have just seen—are not given the same status as the cipher bags, which, of course, are critical?

Sir Geoffrey Howe: My hon. Friend is understandably persistent in drawing attention to the problem. There is no doubt that any abuse of diplomatic immunities undertaken to promote lawlessness should cause the gravest possible concern, but if my hon. Friend studies the provisions of the Vienna convention he will find, as I know other hon. Members are finding——

Mr. Eldon Griffiths: I have studied them.

Sir Geoffrey Howe: Of course, I know he has. One cannot emphasise too strongly that any proposed change must be compatible with the inescapable need properly to protect our own diplomatic traffic.

Several Hon. Members: rose——

Mr. Speaker: Order. I have to protect further business. I shall allow questions to be asked for another five minutes, and I hope that in that time every hon. Member who is standing will be called.

Mr.Tony Banks: Subject to British court requirements, will the Foreign Secretary assure the House that Mr. Dikko will not be allowed to stay beyond the period of the six months temporary entry which he now has? Many of my constituents, or friends and relatives of my constituents, cannot even get a six-month visitor's entry permit. Why should Mr. Dikko be allowed to stay beyond the six months? Clearly, we should want him out of the country.

Sir Geoffrey Howe: The hon. Gentleman mentioned the requirements of British courts. One point beyond doubt is that all people in this country, on whatever terms they are present, are obliged to comply with the laws of the United Kingdom. In relation to Mr. Dikko, my right hon. and learned Friend the Home Secretary will have heard the point raised by the hon. Member and will certainly take account of it.

Mr. Jonatham Aitken: I congratulate my right hon. and learned Friend the Foreign Secretary on his wise and restrained handling of this matter so far. In view of certain reports now circulating in Nigeria, will he make it clear that the Government would take an extremely grave view if his justified expulsion of Nigerian diplomats from London were to be met by totally unjustified reprisals, such as expulsion of British diplomats from Lagos?

Sir Geoffrey Howe: I welcome the chance to underline my hon. Friend's point. However, we see no reason why the Nigerians should take or propose retaliatory action. If retaliation were taken, we should have to reconsider the


matter. As the House has emphasised, it is in nobody's interests to widen or to prolong the dispute. I repeat that I see no reason why retaliatory action should be taken.

Mr. Dennis Skinner: Is the Foreign Secretary aware that some of us have more than a sneaking suspicion that the Government are trying to make a seven-course dinner out of a can of boiling water? Three statements have been made since last Friday on this issue. The nation is in the midst of an economic crisis, but we have not had a statement about the British economy, which is in ruins.
Does the hon. and learned Gentleman appreciate that he could have settled the problem with Nigeria fairly simply? The Nigerians have been up to their necks in debt with Britain for many years, and bureaucrats and politicians have been living fat off British workers as a result of some transactions. Long before this matter began, a telephone call would have made absolutely clear to the Nigerians how Britain felt about it. Some of us think that the Foreign Secretary seeks to divert attention from the crisis in Britain and that that is why the Prime Minister is sitting next to him.

Sir Geoffrey Howe: If the House had to follow every one of the hon. Member's sneaking suspicions, it would be disastrous. His observations on this matter have been as shallow and unhelpful as usual.

Mr. Robin Maxwell-Hyslop: As Her Majesty's Government must be vigorous in their condemnation of all such action what protests did they make against the piracy committed by Israel in international waters against a Cypriot vessel and the kidnapping of non-Israeli citizens on board, bearing in mind our special position with the sovereign bases in Cyprus?

Sir Geoffrey Howe: That is an entirely different question, which does not rise out of this one.

Mr. John Wheeler: I recognise that my right hon. and learned Friend pays due tribute to the special relationship between the United Kingdom and Nigeria, a valued Commonwealth country, but a most serious crime has been committed on British streets, which would normally carry a sentence of imprisonment if there were a conviction. The Nigerian Government have not fully co-operated with the United Kingdom on this matter, and many people regard this is as very serious. Will my right hon. and learned Friend make it clear that the present Nigerian high commissioner would not be welcome if he attempted to return to the United Kingdom?

Sir Geoffrey Howe: As the full extent of the high commission's involvement has not been established, it would be inappropriate for the high commissioner to return to this country.

INMOS

The Secretary of State for Trade and Industry (Mr. Norman Tebbit): With permission, I should like to make a statement about INMOS.
When the House debated INMOS last month, I explained that the Government had two objectives: to ensure the company's early transfer to the private sector; and to find a private sector source for the additional capital and support the company needs if it is to realise its full potential.
This morning Thorn EMI and the British Technology Group announced that they had reached agreement in principle for the purchase by Thorn EMI of the National Enterprise Board's shareholding in INMOS at a price of £95 million.
A sale of the NEB shareholding to Thorn EMI would meet the objectives I set out. Thorn EMI has assured me of its determination to develop INMOS and of the importance it attaches to fulfilling the aims of the company's management. It has the financial, technical and managerial resources to do so. This proposal will assure the continued transfer of technology to Britain and British industry's access to this technology.
The House also expressed concern that the Government should receive a fair price for INMOS. The Government's total investment in INMOS is £65 million, in addition to which certain guarantees have been provided. The Thorn EMI offer of £95 million for the NEB's share of the equity implies a value of about £125 million for INMOS. It offers a fair return on the Government's investment, and Thorn EMI will assume responsibility for the guarantees. The offer will fall to be considered by the Director General of Fair Trading, who will advise me in due course.
Tribute is due to the founders of INMOS and to the work force in Britain and America, who have created a company with a most promising future in this advanced and fast growing industry. It is their skill and dedication that have enabled the Government's investment to bear fruit.
I am glad to tell the House that the transaction has the support of both the British Technology Group and the board of INMOS, which consider that the participation of Thorn EMI will strengthen their company and help it to achieve its objectives. The INMOS board has said it regards Thorn EMI as an ideal partner.
I hope that the House will agree that this represents a satisfactory outcome. INMOS has found a strong and committed parent company. Thorn EMI has gained an attractive investment in a key industry of the future. The Government have secured a fair return on the taxpayers' investment, which vindicates support for the company and the continued development of INMOS' technology within the United Kingdom. I therefore commend to the House this welcome conclusion to a matter in which I know many hon. Members have taken a keen interest.

Mr. Peter Shore: I readily join with the Secretary of State in acknowledging that tribute is due to the founders of INMOS, including the Labour Government, and to the work force in Britain and America who have created a company with such a promising future. I join with him in what amounts to a public celebration of the achievements of this most successful public enterprise.
After our debate on INMOS on 21 June, the Secretary of State will not be surprised to learn that the Opposition, and indeed many Conservative Members, will welcome particularly that part of the statement that promises continued United Kingdom ownership and control of INMOS. Will he not have the honesty and grace to acknowlege that the House helped at least to steer him away from the crass folly—and worse—of accepting last month's offer by the American AT and T company to buy up and to break up INMOS and then to hive off separately the R and D establishment at Bristol?
Is the Minister aware that the sale of INMOS, just when it is moving into strong and growing profitability, is patently ideological in its motivation and financially far less rewarding than it would have been if he had had the guts to stand up to the Treasury and tell it to wait? Is he satisfied that, in the light of its poor record, in such high technology areas as nucleonics and body scanners, Thorn EMI has the right people at the top level to make the correct strategic decisions for the development of INMOS?
What guarantees have been given—I found none in the statement—for the continuing autonomy of INMOS within the vast and sprawling Thorn EMI group? Does the right hon. Gentleman think, therefore, that it would have been prudent to have retained a golden share or its equivalent to ensure that the new owners do not subsequently sell-off INMOS to an overseas company and to maintain its continued independent management within the Thorn EMI group?

Mr. Tebbit: It is regrettable that the right hon. Gentleman should add sheer impudence to the reckless stupidity that he exhibited in the debate on INMOS a few weeks ago. He knows perfectly well that his reckless remarks then came close to prejudicing the deal and thereby damaging the British interest. I told him so at the time and he pretended not to understand. I repeat today that the right hon. Gentleman's conduct came close to prejudicing the deal.
The right hon. Gentleman's carping, ill-informed and ill-natured remarks about Thorn EMI contrast with reality. Thorn EMI has made far more good commercial decisions that the NEB or the right hon. Gentleman and his hon. Friends, who landed us in adventures such as De Lorean, of which he is no doubt still very proud. If he throws enough money at problems, some of it is bound to bounce back, but very little has done so. If INMOS is as good an investment as I believe it to be, and he believes it to be, it is absurd to suggest that Thorn EMI would want to get rid of it.

Mr. Mark Robinson: I congratulate my right hon. Friend on his statement. INMOS is in my constituency in Newport and it has been known since 1980 that if it reached profitability it would be placed in the private sector. I welcome the fact that the uncertainty has now ended, and I compliment my right hon. Friend on finding a British solution, for which some of us have argued for a long time. Does he agree that INMOS's contribution in terms of jobs—the number has doubled since I entered the House—is continuing to increase and offers future prosperity?

Mr. Tebbit: I thank my hon. Friend for his remarks. It was paramount in our consideration to find the right

industrial solution for the company. I believe that that has been found and that Thorn EMI has all the qualities required to make a success of it. I am very glad to have been able to collect £95 million for the taxpayers to help make up the NEB losses of £31 million on NEXOS, £4½ million to date on Aragon, £7·2 million on INSAC and £75 million on Alfred Herbert. That was the result of the sheer brillance of NEB decisions.

Mr. Paddy Ashdown: Has not the British taxpayer had to provide about £150 million to launch and sustain INMOS? Has not a United States independent valuer this year assessed the value of INMOS at £200 million? Is not this year's turnover predicted at £100 million? Is not this year's profit, based on first quarter returns, predicted at £30 millon? In the light of those facts, how does the Secretary of State justify, except in terms of his own narrow dogma, the sale of this profitable company with a high potential for only £95 million to one of the Government's friends?

Mr. Tebbit: Broadly, the answer to most of the hon. Gentleman's questions is no. But let me specify more clearly some of the matters on which he is wrong. First, he compares speculative valuations of the company at some considerable time in the future with the price achieved for 76 per cent. of the company's equity. So he is in a fairly muddled condition. [Interruption.] The hon. Gentleman asked a series of muddled questions. He must be quiet and listen to the clear answers that he is getting.
The hon. Gentleman got himself thoroughly muddled about the extent of the taxpayers' investment. The taxpayers' investment has been £65 million, and, in addition, certain guarantees have been given. As I made clear in my statement, the Thorn EMI company has taken responsibility for the guarantees.

Mr. Michael Grylls: Will my right hon. Friend accept that most sensible people recognise that this high technology company will be much better off in the private sector, and that most Members wish it well in the private sector, under successful managers, in Thorn EMI?

Mr. Tebbit: I am sure that my hon. Friend is right. There is no good reason why the taxpayer should be called upon to provide the investment for companies of this kind. The launch of the company has been successful; it will now go successfully into the private sector. That is what should be done. If there are people in the Labour party or in the trade union movement for example, who think that this is an undervaluation, I am amazed that they did not come forward and make an offer for it themselves.

Dr. Jeremy Bray: Can the Secretary of State say what undertaking Thorn EMI has given to INMOS of its total independence of management? Can he confirm that under the take-over rules Thorn EMI is bound to offer the founder and other employee shareholders the same price that it has paid to BTG? Does he think it any wiser to ease the incentive on management by taking out its equity interest than it is in the interests of the British taxpayer to sell out prematurely?

Mr. Tebbit: The best answer that I can give to the hon. Gentleman's question is that the INMOS board on which Mr. Barron sits has recommended the offer to BTG. Thorn EMI has expressed the wish to retain the company's existing skills, and I hope that, having firmly established


the company's future, there will be every opportunity of securing those. Of the three founder members, only Mr. Barron and Dr. Petritz remain with the company, and their precise position will be decided in discussion with Thorn EMI. Both, of course, are members of the INMOS board which supports the present deal. I think therefore it would be reasonable for the hon. Gentleman to assume that the founder members support the deal and are happy with the arrangements.

Sir John Farr: I congratulate my hon. Friend on concluding this deal with the British company. To some Conservative Members, however, what is more important than the cash gained is the fact that the company will remain under British control.
In view of the fact that in this country we are so low in the world production league of chips as to be almost invisible, to see INMOS go overseas at a later date would be fatal. Can my right hon. Friend tell the House—he has already been asked this by the right hon. Member for Bethnal Green and Stepney (Mr. Shore)—what further control there is on the company? Have we erected any barricade or barrier to prevent total or part disposition of this very important state shareholding to an overseas buyer at a future date?

Mr. Tebbit: I am grateful for my hon. Friend's remarks. I do not think that he should underestimate the extent of the abilities of this country in the semi-conductor field. There are 10 factories already producing semi-conductors in the United Kingdom. [Interruption.] My right hon. Friend the Minister for Information Technology has just reminded me. If the hon. Member for Bolsover (Mr. Skinner) would listen to my right hon. Friend, he would learn a great deal more than he does by constantly yacking with his ears shut and his mouth open.
The prime logic of the deal has been the industrial logic, and making sure that there is a good future for INMOS. The best security against any future disposals of INMOS is the success of the company. If the company is successful, Thorn EMI will not wish to dispose of it.

Mr. Tam Dalyell: Does the Secretary of State recollect that when I participated in the INMOS debate I said that I had spent several hours at INMOS in Newport as its guest in December? Therefore, may I ask him specifically two questions? When he talks about developing INMOS, what does that mean in terms of research and development? Does it mean expansion at Bristol, expansion elsewhere or expansion at a Welsh university? What precisely does it mean?
Secondly, may I ask the Secretary of State this as gently as possible? He told my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) that his speech in the INMOS debate had prejudiced the deal. I listened carefully to my right hon. Friend, with whom I have not always agreed, and he made a most powerful, serious speech. What hard evidence is there that my right hon. Friend prejudiced this deal?

Mr. Tebbit: First, the company will be developed in a manner which is satisfactory to the board of the company. [AN HON. MEMBER: "That means nothing."] The hon. Gentleman says it means nothing. I am telling him that the present board of INMOS is satisfied that the arrangement provides adequately for the future development of the company, and I agree with the board of the company.
Secondly, with regard to the speech of the right hon. Member for Bethnal Green and Stepney (Mr. Shore), I am surprised that the hon. Member for Linlithgow (Mr. Dalyell) does not understand that, when difficult commercial negotiations are going on that type of speech is the least helpful thing that can happen, when I was being asked by the right hon. Gentleman for pledges to exclude many of the potential would-be purchasers. It was hardly the way to secure the best deal for the British Government.

Mr. Richard Page: Will my right hon. Friend accept that Conservative Members greet the sale with relief as well as congratulations, as it is one of the few NEB companies which has given a modest return on the money invested and compares favourably with the very long list of liquidations and bankruptcies which litter the way among NEB companies which have been promoted by the Labour party? Will my right hon. Friend assure the House that, if an opportunity arises to sell any of the other companies in the British Technology Group, where suitable, he will immediately do so?

Mr. Tebbit: I thank my hon. Friend and I give him the assurance that we shall continue to look for good homes for other companies in the NEB-BTG portfolio.

Mr. Ian Wrigglesworth: Is the Secretary of State aware that the success of INMOS is very welcome news and the retention of its ownership in this country is a great relief to all those who feared that it might go abroad?
Can the Secretary of State clarify two points? First, how does he justify the claim that this offer is a fair return on the Government's investment? Did the Government consider other methods of selling the shares, such as a tender offer or a public flotation of the shares, in order to allow the market to judge the value of the company? Secondly, can he say a little more about the position of the founder members, who are are so crucial to INMOS? Am I right in thinking that the shares will now be valued at some £5 million per founder member? If that is the case, might there not be a temptation for them to leave the company, thereby doing it considerable damage?

Mr. Tebbit: First, of course we considered many other possible routes for the disposal of this company. The flotation possibilities were not particularly attractive. They were a little way down the road and somewhat speculative. To have got the best price, the majority of the shares would probably have been sold in the United States. Even so, we did not see the opportunity to sell a controlling interest in the company—certainly not in the immediate future—and, if that route had been taken, the Government might well have lost control of it at some time or another, while still being responsible for a good deal of its debt. It was therefore not an attractive route.
I think that I had better leave the founder members to speak for themselves. I understand that Mr. Barron, in particular, has been making statements to the press today through the board of INMOS, and has indicated his satisfaction with the deal. I am sure that he will stay with the company.

Mr. Jonathan Sayeed: During the debate on INMOS, I asked for assurances from my right hon. Friend that the company would not be sold at a bucket-shop price, and that its technology and expertise


would not be dispensable. I am very grateful for his statement. The company was sold at a sensible price to a British firm, and the statement will be most welcome in Bristol, where part of INMOS is based.

Mr. Tebbit: I thank my hon. Friend for what he has said, and emphasise again that I consider the deal to be a good one, particularly on industrial grounds. It was those grounds which had priority, and not the question of exactly how much we could squeeze out at the end of the day. [Interruption.] Yes, indeed. We have made it plain many times in the House that our priorities in the privatisation programme relate to the long-term economic effects, as opposed to the immediate cash effects.

Mr. Roy Hughes: Does the Secretary of State appreciate that there is bound to be concern about the rather cynical approach that he has adopted, both in the debate a week or so ago and in his statement this afternoon? Does he further appreciate, bearing in mind the huge public investment in the firm, that there is also bound to be concern about its future development—plans are already under way—and about employment prospects in Newport? Can the right hon. Gentleman say anything concrete which may at least alleviate the present concern of employees in Newport?

Mr. Tebbit: Let me tell the hon. Gentleman—in case he missed it on the first, second and third occasions —that the deal has the support of the board of INMOS, whose members regard Thorn EMI as an ideal partner. I suspect that the hon. Gentleman's anxiety arises from his frustration at seeing a successful deal.

Mr. Hugh Dykes: Does not my right hon. Friend agree that the Government should be congratulated on this excellent deal? Does he not think that, after the damage done by the Opposition in the original discussions, it is appalling for the right hon. Member for Bethnal Green and Stepney (Mr. Shore) to cast aspersions on the high-technology abilities of Thorn EMI, one of the most successful groups in the country?

Mr. Tebbit: I agree with my hon. Friend. Not content with having prejudiced the deal before, perhaps in ignorance, the right hon. Gentleman has tried today to prejudice it in full knowledge by attacking the competence of Thorn EMI. I only wish that his Government had shown half its competence.

Mr. Tim Wood: Despite the ill-judged and carping criticisms of Opposition Members, I assure you, Mr. Speaker, that Conservative Members warmly welcome the statement, and are delighted that Thorn EMI is making this investment. I am sure that the development of INMOS will be much more successful as a result. I wonder whether anything can yet be said about the future of the various INMOS development and manufacturing centres.

Mr. Tebbit: I do not think that it would be right for me to add anything to what was said by the board. The company's future will depend on its success in developing its products, and I believe that the chances of such success have been increased by the deal announced today.

Mr. Brynmor John: The right hon. Gentleman praises the workers, but does he accept that they are justifiably concerned about the level of employment in, for example, south Wales? Does he expect employment to remain static or to increase, or will it be a matter of the board of INMOS judging that employment can go hang so far as profits are concerned?

Mr. Tebbit: Unless there are profits, there will not be employment. The future and the expansion or otherwise of the work force depend upon the success of the company, and not upon windy rhetoric in the House. I believe very strongly, as does the board of the company, that the prospects of success have been enhanced.

Mr. Ian Lloyd: We all wish the new arrangements every success, but the Secretary of State will be as aware as I am— if not more so—of the quite exceptional conditions that obtain in the semi-conductor industry. He will know that our largest company is 30th in the world league, and that in Japan and the United States exceptional sums of Government money have been spent,—and are continuing to be spent—in support of the private sector. What is the basis of his confidence that Thorn EMI INMOS will be able to climb up the league from 30th position without further public support?

Mr. Tebbit: It is a confidence that I share with the management of the companies concerned.

Mr. Shore: The Secretary of State prefers to accuse and abuse rather than answering questions; we are all familiar with his technique by now. The more uneasy he is about answering the fundamental question, the more abusive he is. We have heard the way in which he has replied to his hon. Friend the Member for Havant (Mr. Lloyd), for example. He knows perfectly well that he came perilously near to betraying the national interest by agreeing to sell the firm to an American company. He considered the proposition before him very seriously; I know it, he knows it, and that is why he is reacting so strongly.
Let me repeat the question that the right hon. Gentleman did not answer. In virtually all their privatisation deals the Government have insisted on retaining a golden share—or at least some control mechanism—because the national interest has been involved. Enterprise Oil is the most recent example, but it is by no means the only one. Why are they now denying themselves the possibility of a say in the future of this semi-conductor firm and in the same semi-conductor industry? That industry will be crucial, involving as it does the transputer development which—as the right hon. Gentleman ought to know—is probably of world-shaking importance.

Mr. Tebbit: I must congratulate the right hon. Gentleman on his sheer courage in putting his head above the parapet to get it thumped once again. [Interruption.] Perhaps the hon. Member for Wigan (Mr. Stott) would cease interrupting from a sedentary position for once. I did not seek to take a golden share because the British Government have no wish to have such a share in Thorn EMI Ltd., and, quite clearly, we could not have continued to seek to control a company which we had sold to another company.

Bus Industry

The Secretary of State for Transport (Mr. Nicholas Ridley): With permission, Mr. Speaker, I should like to make a statment about the bus industry.
The Government have now completed the review of the bus industry to which I informed the House on February 14. Bus passengers and taxpayers are not being well served. Over 10 years, the cost of local bus services have risen by up to 30 per cent. in real terms. Fares have gone up by over 30 per cent. in real terms. Subsidies have risen while services and usage have declined. Rural bus services are causing serious concern. The discipline of competition in the market place can bring great increases in efficiency, and cuts in fares. This has been shown by the deregulation of coach services in 1980. If new ideas and new services are allowed to flourish, then the total public transport market can expand, with advantage to operators, workers, and, above all, passengers. It is the users of buses who should come first, and they are the less well-off members of our society. The Government's proposals are set out in a White Paper published today in the names of myself and my right hon. Friends the Secretaries of State for Scotland and for Wales. Copies are now available in the Vote Office.
We propose to introduce legislation at the earliest opportunity to remove restrictions on competition in local bus services. We shall abolish road service licensing throughout Great Britain, except for the time being in London where new arrangements have just been introduced. We attach the highest priority to maintaining standards of safety, and quality supervision of operators will continue to be tightened, with more resources devoted to the purpose.
Local authorities will be responsible for providing subsidy to socially necessary services which are not otherwise viable in a free system. They will let contracts on the basis of competitive tenders. Support for these services will thus be made specific and transparent. Concessionary fare schemes for the elderly and disabled will continue, but must be open to all operators on an equitable basis of costing.
These policies will benefit rural communities, for whom public transport links are vital. Rural passengers will benefit from competition, more flexibility and new ideas. In addition, we shall take two special measures to aid rural transport. The first is a transitional grant, paid to operators of rural services. This will last four years, reducing in equal steps from a starting level of up to £20 million. The second is a special fund of up to £1 million a year to finance innovation in rural transport. I am glad to say that this will be administered by the Development Commission in England. Similar arrangements will be made in Wales and Scotland. We shall explore ways for making wider use of services run by education, health and social service authorities and the Post Office, and simplify the law on voluntary operation of minibuses.
The structure of the bus industry must be changed to remove the dominance of very large public sector operators and to allow competitors an opportunity to enter the market. Passenger transport executives will be required to break down their operations into smaller units as separate companies. The National Bus Company will be reorganised into smaller free-standing parts, which will be transferred to the private sector. District councils who own

bus operations will be required to put them at arm's length into companies, which they will still own, but to which subsidy will be provided only through tenders, and made transparent. Agreements between bus operators will be made subject to the Restrictive Trade Practices Act 1976. We will widen the opportunities for taxis and licensed hire cars by introducing new rules enabling them to carry several passengers at separate fares in certain circumstances. We shall issue consultation papers on the detailed implementation of a number of these proposals.
These changes reverse a policy of protection which has lasted for over 50 years. This straitjacket is now producing high-cost and inadequate services. The Government's proposals will give the opportunity for the many able managers in the bus industry and for others with enterprise and initiative to offer better services to the public at less cost.

Mr. John Prescott: I wish to protest at the outset at what I know is the normal practice of providing a copy of this White Paper of 80 pages 20 hours after the press receive it.
The White Paper means nothing less than a return to a Beeching policy on the buses. The Tories chopped the railways in the 1960s and they are taking a Beeching axe to the buses in the 1980s. The Government are set on a course of destroying our nationwide regulated bus network. They are turning back to the 1920s with a free-for-all on the profitable routes, to the detriment of those who do not live in the high streets.
Where is the evidence of the need for such a radical change in the country's road transport structure? All the professional reports, including those commissioned by the Minister's own Department, have questioned his assumption that a reduction in public subsidies will lead to a better, cheaper transport system.
Is the Minister aware that the whole bus industry and the professional experts are opposed to the policy that he is advocating today? Does anyone, other than the Secretary of State, support these damaging and unjustified proposals? Is he also aware that, in his much-vaunted trial area experiments, cowboy operators with unsafe coaches have raced along the high streets of Hereford, touting for business and forcing the commissioners to act in the cause of public safety against one of them, while rural services have been reduced?
Does the Minister recall that the last Tory transport experiment, supposedly encouraging competition, saw British Coachways, which was launched amid much flag-waving by his predecessor, collapse within 12 months, leaving the public sector to pick up the pieces? That record compares most unfavourably with the proven success of Labour transport policies in the London and metropolitan council areas, which have produced more services with lower fares and more people travelling. That success is the real motivation for this vindictive measure.
Why does the Minister in the White Paper applaud the success of the National Bus Company and then reward it by proposing its privatisation and break-up into smaller units? What is to be the size of the proposed units, and what will happen to the units that remain unsold because they are unprofitable? Will he take note of the report, published this week, by the stockbrokers Grieveson Grant—not known as a Socialist group—stating that the break-up of the National Bus Company was the option likely to produce the least return for the Government? Will


he pay attention to these warnings from his friends in the City, or does he intend to go down the Enterprise Oil road taken by his right hon. Friend the Secretary of State for Energy?
Will the new form of municipal and passenger transport authority bus operations receive revenue support? What conditions will he impose? How will he deal with their extra cost arising from training, administration and employee pension schemes, which are not carried by private competitors, giving them an unfair advantage in competing for contracts?
What threats are posed to the traditional cab trade especially in London by the Minister's proposals? Will he confirm that the fuel tax rebates will be available to all operators? What conditions, if any, does he have in mind to impose on revenue financial support? Why is he not guaranteeing in statute the provision of concessionary fare schemes for pensioners and disabled people, as he has in London? What estimate has he for savings at the expense of those concessionary schemes?
Will the Minister confirm that the major slump in the provision of services will be in the rural areas? Will he accept that the White Paper's reiteration of experiments such as post buses cannot provide an adequate alternative service? What is his estimate of the difference between the £20 million grant that he proposes for subsidising unprofitable rural services, and the present level of public support for such services in rural areas?
I assume that the Secretary of State will guarantee a debate before the proposals are put into legislation. What period does he allow for such debate before legislation? Will it be only the summer months before the Tory party conference, when he will go, with all the rhetoric at his command, to announce a new policy for the bus industry?
The result of this policy will be that the young, the old, the pensioners and the women who depend on public transport will end by paying higher fares for diminished services, with the burden placed yet again on those least able to bear it.

Mr. Ridley: The hon. Gentleman reacted with typical exaggerated bellicosity and with a list of questions that would cause the House to sit almost as long as it did yesterday if I tried to answer them all. He claims that the White Paper was leaked early—I have not heard that before—but he certainly has not taken the opportunity of reading it because he would have found the answers to most of his questions there. The policy is intended to expand public transport by making it cheaper, through competition in the profitable areas.
Another point that the hon. Gentleman has apparently not picked up is that, particularly in rural areas, where public transport may not be viable, there are to be refined arrangements for ensuring that subsidy continues and is directed at obtaining value for money by bringing the transport to the passengers and taking them where they want to go, rather then throwing money at the problem, as no doubt he would prefer. We have designed the proposals for the benefit not of the bus industry but of bus travellers; it is they who have suffered.
The experiment in Hereford and Worcester has been highly beneficial to passengers. There has been a 38 per cent. reduction in subsidy from the county council and a

cut of up to 40 per cent. in fares, with the same network, or a better one in some areas. I have a message from the West Midlands traffic commission chairman, which says:
No apparent difference discerned since Trial Area introduced in July 1981 … No extra technical problems, checks by Vehicle Examiners running as per normal, no extra disciplinary cases heard.
I find it extraordinary that the hon. Gentleman should complain about the performance of stage coaches under deregulation. Those services have been smartened up, improved, made cheaper and more numerous, and have carried an immensely larger number of people in great comfort since the dead hand of regulation was removed from them.
I turn to the report that the hon. Gentleman has had from a stockbroker; it is extraordinary how the Labour party has suddenly tried to make allies in the City. Even if competition in the bus industry and privatising large parts of it result in less take for the Exchequer, provided that the result is better rural and urban transport I believe that it is a very good deal. That is what the White Paper is about. We are seeking fair competition; we shall come to the details of that later. There is no threat to the cab trade in London; indeed, there will be extra opportunities through the introduction of shared taxi facilities, which was requested. The fuel duty rebate will remain as at present and concessionary fare schemes will continue to be the responsibility of local authorities, as they have been. Indeed, the Labour party has always said that that should be so. Finally, the policy will be of benefit to bus travellers, especially in the rural areas, and to those who have had to pay the enormous and mounting subsidies, which are quite unjustified, for both rural and urban areas.

Several Hon. Members: rose——

Mr. Speaker: Order. I repeat that there is an important debate to follow this statement. However, I fully recognise the importance of the subject to hon. Gentlemen. Therefore I propose to allow questions on this subject until 5.30. If the hon. Gentlemen involved put their questions briefly, I hope to be able to call them all.

Mr. Terence Higgins: May I enthusiastically congratulate my right hon. Friend on his proposal to implement the ideas that were set out in the Conservative election manifesto? I reject the points made in the filibuster from the Opposition Front Bench. Is not the increase in competition likely both to improve consumer choice and reduce prices to consumers, and is not that to be welcomed? Is my right hon. Friend aware of the great sense of injustice felt by some of those who suffer on account of the arrangements for concessionary fares because of the vast disparity between small areas, because they are dealt with on a local basis and may cover a single route? Will he consider carefully whether this might not be better done on a county-wide basis so that there will not be such great disparities between small areas?

Mr. Ridley: I am grateful to my right hon. Friend for his clearly sensible and helpful reaction to an important new transport policy. During the past 10 years, the costs of big bus operators, and fares, have increased by about 30 per cent. in real terms. That shows the enormous scope for savings to be made by having more efficient units in the industry.
On my right hon. Friend's second point, I recognise the difficulties but I believe that the question whether county


or district councils should arrange concessionary fares is primarily one for local government. I am sure that that is something to which the House will wish to return when it considers the legislation.

Mr. David Penhaligon: Is the Minister aware that many of us are worried not so much about choice in rural areas, as about maintaining a bus service? Who will decide finally what is a socially necessary service? Will it be the Minister, the county authority or some Whitehall bureaucrat? The theory is that if it is the Minister, the bus service as we know it in rural parts of the country will, in effect, disappear.
Where will the £20 million come from? Is it real new money, or is it taken from the transport grant, to be allocated again afterwards? Is the Minister's attitude to public transport provision such that the savings that he may obtain through an increase in efficiency will be used to increase the scale of public transport in Britain, or does he hope that the saving will reduce the net Exchequer contribution to maintaining a fabric of service in rural and urban areas?

Mr. Ridley: I believe that the policy will bring about the maintenance not only of the hon. Gentleman's bus services but, in some cases, even some choice. It will operate in the following way. Where a service does not operate in the free market because no operator considers that running a service is viable, the county or district council may call for tenders to run a specified route or small network and will be able to accept the lowest tender so as to award a contract to that operator and subsidise him for a specified number of years. The £20 million help for rural areas during the transition to the new regime will be paid to the operators, so is new money in the sense in which the hon. Gentleman meant it. The savings will be obtained not only from an increase in the internal efficiency of bus operators but by ensuring that the transport in all parts of the country is just right to meet the needs of each area but is not excessive, which, as we all know, happens in some areas.

Mr. Colin Shepherd: I wish to set the record straight as regards the negative comments by the hon. Member for Kingston upon Hull, East (Mr. Prescott). The citizens of Hereford relish the transport experiments because buses arrive when they want them and go where they want them to go, and at fares that are less than half what they paid previously. Furthermore, the bus operators are nice to them. They do not wish to see any detraction from the new freedom and the service that have been achieved since the experiment began. Will my right hon. Friend also accept that people in the residential areas of Hereford will feel reassured by the lessons that have been drawn from the trial experiment when too many of the buses have jockeyed for position at the same time? There will be a welcome for the determined approach that he has set out clearly in the White Paper to bring that problem under control and thereby get the best of both worlds. May I encourage my right hon. Friend in this endeavour?

Mr. Ridley: I congratulate the county council of Hereford and Worcester on having blazed the trail to show just what this policy can do. I advise the council that in reward it will have little if any further changes or adjustments to make because of the great experience it has found in being able to operate a sensible system in this

way. I add that we have strongly noted the point made by my hon. Friend about behavioural control on the road. In the White Paper he will find that there are proposals to give power to the new licensing authorities to take away an operator's licence if his drivers behave in an anti-social manner on the roads.

Mr. Martin Flannery: On a point of order, Mr. Speaker.

Mr. Speaker: I shall take the point of order afterwards.

Mr. Flannery: May I raise the point of order now, Mr. Speaker?

Mr. Speaker: Order. I am saying that I will take it afterwards and that it will still be relevant to this subject.

Mr. David Marshall: The Secretary of State has announced the break-up of the National Bus Company. Will he tell us whether he intends to do the same with the Scottish Bus Group at some future date? What is his estimate of the effects of the White Paper on services operated by Strathclyde PTE? Does he not realise that the proposals in the White Paper will be to the long-term detriment of the travelling public in Strathclyde and throughout Britain?

Mr. Ridley: The hon. Gentleman will know that there is a special chapter on Scotland in the White Paper. My hon. Friend the Parliamentary Under-Secretary is present and will be giving detailed answers to questions about Scotland which any hon. Member may ask. [HON. MEMBERS: "When?"] In answer to the hon. Gentleman's question, there is no intention of making changes to the Scottish Bus Group.

Mr. Robert Adley: Is my right hon. Friend aware that the account of the bus services described by the official spokesman for the Opposition as some sort of current panacea, is not one that would be recognised by my constituents? On the whole, sensible people agree that changes and innovation are badly needed in the rules and regulations for buses, which have been unchanged for so long. Nevertheless, does not my right hon. Friend agree that there is no magic panacea for public transport and will he promise to keep an open mind on the way in which the experiments are working? Finally, will he at least consider an increase of the £1 million which he mentioned as an innovation fund that presumably has to cover England, Scotland and Wales?

Mr. Ridley: The White Paper contains a large number of proposals to consult on all sorts of specific, transitional and technical issues arising out of the policy. We shall pursue those consultations fully and vigorously.
With regard to my hon. Friend's final point about the innovation grant, the Development Commission has kindly undertaken to use that £1 million in helping new operators to get into the business. It reckons that it is about the right amount that is necessary, and probably the most that it would be able to handle.

Mr. Peter Hardy: The Secretary of State has given the House a great deal to think about. Obviously, a number of the contradictions in his speech will have to be considered later. However, as he confessed a commitment to lower fares, better services and the principle of public subsidy, may I, as a resident in South Yorkshire, ask him when we may expect those remarkable advantages to come to us?

Mr. Ridley: As the hon. Gentleman speaks for a south Yorkshire constituency, I advise him that there are two ways in which to lower fares. One is the way in which South Yorkshire county council has lowered them—by massive subsidies from the ratepayers. The other is the way in which I have lowered them on the air routes between London and Amsterdam—by introducing competition.

Mr. Conal Gregory: I am sure that the House will welcome the statement made by my right hon. Friend in terms of de-regulation. He has rightly had his attention drawn to the Hereford and Worcester where the services have been increased and the fares reduced by up to 40 per cent. I also commend the ESCORT scheme for public rural services in East Sussex and hope that that is extended as a result of the enterprise about which my right hon. Friend spoke today. My electors are dissatisfied that the national subsidy of £923 million is spent recklessly, as my right hon. Friend said, in places such as the people's republic of south Yorkshire, and that in west Yorkshire the citizens of York must contribute £4·7 million.

Mr. Ridley: I am grateful to my hon. Friend. There are lessons to be learnt from the ESCORT project. We shall try to learn them and incorporate them.
I am also grateful to my hon. Friend for pointing out that if the cost of concessionary fares is included, the bus industry probably costs taxpayers and ratepayers slightly more than the railway industry, whereas a few years ago it was costing them hardly anything. The Government had to curtail the rapid increase in the cost to taxpayers and ratepayers if there was ever to be sense and fair competition in transport.

Mr. Nigel Spearing: The Secretary of State reminded the House that this legislation will mark the end of 50 years of regulation. Will he confirm that that regulation was introduced by a Conservative Government to improve facilities for travellers at a time of rising and buoyant demand? As his new proposals are also supposed to help the travelling public, will he assure the House that if the results do not come up to his expectations, the legislation will permit re-introduction of regulation?

Mr. Ridley: The connection is even closer because when the 1930 legislation, bringing in regulation, was introduced I believe that my uncle, Euan Wallace, was Minister of Transport.

Mr. John Home Robertson: Bring him back.

Mr. Ridley: I am equally sure that if we brought him back he would be one of the most enthusiastic supporters of the legislation that I propose.

Mr. John Cartwright: With the spectre of rate capping hanging over local authorities, how does the Secretary of State expect them to provide subsidies for socially necessary bus services? If authorities are unable to pick up that financial burden, what will happen to those essential bus services?

Mr. Ridley: At the moment local authorities provide large sums of money which are much smaller per head of the population in the shire counties than in the metropolitan areas. They will still have their own resources to finance socially desirable services. In rural areas those resources will increase with the new grant that I announced today.
If we are to reduce overspending in metropolitan areas—that is necessary if we are to reduce the appalling burden of rates in those areas—it should be welcomed as helpful that we are showing local authorities a way of obtaining better value for money—more transport for the same money— and saving money that is being wasted by using the forces of competition and private enterprise to provide a service cheaply and properly.

Mr. John Maples: May I tell my right hon. Friend how welcome his statement is and how welcome it will prove to be to taxpayers and passengers. Does he not agree that this is the right way to set about reducing the massive public subsidies paid for bus services? However, perhaps he can find some words of condolence for the Opposition for having slaughtered yet another of their sacred cows.

Mr. Ridley: I am sorry to have to agree with my hon. Friend that this is probably one of the last areas where a centrally planned bureaucratic service has been allowed to survive. It is the last remnant of Socialist ideology. Perhaps that is why the hon. Member for Kingston upon Hull, East (Mr. Prescott) reacted with such over-exuberance.

Mr. Roland Boyes: I am amazed and staggered that the Secretary of State is not aware of the high international reputation of the integrated passenger transport system in Tyne and Wear. Has the Secretary of State had an opportunity to study the report of MCP Limited of Liverpool, which found that 282 million passenger journeys were made in 1973. Because of the falling population, the rise in unemployment and the greater number of motor cars it was forecast that the number of passenger rides would fall to 250 million, whereas they rose in 1983 to 311 million passenger rides. Is it not a scandal that the right hon. Gentleman allows political vindictiveness to interfere with such a successful system as that of Tyne and Wear? Is that not outrageous and insulting to the passengers and population of that area who not only need but care for what the councillors of that area do not want changed.

Mr. Ridley: I do not quite see the reason for the hon. Gentleman's alarm. If, when and where there is an efficient and cheap system of public transport it can perfectly well thrive and improve in the bracing conditions that will exist in future. Moreover, I believe that the policy that I am announcing will have that effect and will make much more possible cheap and socially desirable public transport throughout the whole country. If the hon. Gentleman feels that any of the areas that he mentioned will not be able to survive competition from the private sector, he has a problem and it is high time that the problem was addressed by those areas.

Mr. Eric Cockeram: Does my right hon. Friend recall that when his predecessor announced the policy of deregulation and competition on inter-city coaches, the Jeremiahs on the Labour Benches predicted doom and gloom, whereas the travelling public increased their use of these facilities, with better service and lower fares, by millions of journeys per year. Will he therefore, as his new policy unfolds, take note of the views of the travelling public rather than those of Labour Members who are more concerned with preserving a monopoly and the position of the transport industry unions?

Mr. Ridley: My hon. Friend is right about the dramatic and startling effects on long distance coaches of deregulation. He is equally right in pointing to the constant weakness which the Opposition reveal. They are interested in the welfare not of the passengers but of the transport organisations.

Mr. Ken Eastham: May I assure the Minister that his statement today will create great anxieties, especially among old-age pensioners who are so dependent on public transport? Is it not a fact that this statement is concerned only with profits? May I assure the Minister when he makes observations about private companies, that they run clapped-out vehicles that are not worthy of public transport. Finally, if as a result of this Government's policy, public transport completely collapses, will the Minister provide everyone with pogo sticks?

Mr. Ridley: One does not have to go more than 100 yards from the Palace to see a large number of private coaches used for stage carriage, tourism and excursions from all countries of Europe, but mainly from this country. They are of a much higher standard than those run in many other cities by public enterprises. I make the point very forcefully that it is the private sector and deregulation that has led the trail to improved standards of coaches. I do not know why the hon. Gentleman thinks that that will not happen as a result of this policy.

Mr. Gerald Malone: Is my hon. Friend aware that the deregulation of coach services in Scotland has led to increased services between cities in vehicles of incomparable quality, far beyond the standard of those offered by public authorities? Does he agree that there is delight on the Conservative Benches at the possibility of those facilities being extended to more cities in Scotland and further delight that his policies will result in some truth being restored to the adage, "There will be another one along in a minute?"

Mr. Ridley: I am grateful to my hon. Friend and I believe that he is right. It is the Conservative party which has the perception to see that services and quality can be improved and costs reduced all at the same time, as we have shown with long distance coaches.

Dr. John Marek: The White Paper entitled "Buses" presented by the right hon. Gentleman states on page 4, paragraph 2.3:
supervision of the quality and safety standards of public service vehicles and operators will be maintained and tightened.
Will the Minister give the House an assurance that the average age of the current operating stage carriage vehicle fleet will not get older as a result of his proposals? If he cannot give that assurance, has his Department made an estimate of how much older the fleet will become?

Mr. Ridley: We wish to enhance the control of safety standards. We intend to amalgamate the traffic commissioners and the licensing authorities, which will become regional authorities. That will ensure that inspection of both heavy goods and public service vehicles is tightened up and improved and, where necessary, staffs will be increased. I do not know what the average age of vehicles will be, but we wish the average condition of vehicles to be improved, whatever their age.

Mr. Peter Fry: Clearly the results of the measures announced this afternoon will take some

time. I hope that, unlike most of my right hon. Friend's immediate predecessors, he will be in office long enough to see the results.
There is much talk about the subsidy of an individual service. I remind my right hon. Friend that there is considerable cross-subsidy within an individual service, especially late-night and weekend operations. What steps will be taken to ensure that operators do not take over a service running a route at highly profitable parts of the day but denying people in urban areas late-night and weekend bus services?

Mr. Ridley: I am grateful to my hon. Friend, especially for his opening remarks which I am sure were addressed to my right hon. Friend the Prime Minister.
Cross-subsidy takes place within a service or mini network, much of which it is in the interests of the operator to continue because it provides goodwill and a complete service. Operators wishing to run less profitable or more profitable routes or buses will be free to do so. If a late-night or weekend service is not in their interests, there is nothing to stop a local authority asking for tenders to run a socially desirable service.
If it is a socially desirable service, would it not be more sensible that its cost should fall on taxpayers and ratepayers, rather than on passengers who may be less well off on the more populous routes?

Mr. Bill Michie: I am a little concerned about what has just been said. I understand that subsidies will be available to the private sector and, if no profit can be made, the local authority will carry the can.
I refer to the Minister's comments about improved prices—I do not know whether they will be up or down—and the betterment of services. Is he saying that he will match the position in south Yorkshire, with its bargain fares? Will he match or improve the service routes within Sheffield and south Yorkshire county council area? Will he increase passenger mileage, cost-effectiveness or the safety record of public transport? Will the cost per passenger mile be decreased? Will he defy about 500,000 plus people who signed a petition in south Yorkshire?

Mr. Ridley: Fares should find their true level by the process of fair competition between different operators who all need to make a profit to stay in business. It is easy to bring fares down by milking ratepayers and taxpayers, but, as I said to the hon. Member for Kingston upon Hull, East (Mr. Prescott), the Government do not believe that that is the right way. The right way has been shown by halving the cost of air fares between London and Amsterdam simply by introducing competition.

Mr. David Harris: Is my right hon. Friend aware that his statement will be welcomed not only by Conservative Members who represent rural areas and who believe that the present system has led to a fossilised and over-subsidised service in many areas, but by many small enterprising operators who have been prevented from giving the public the services that they want?

Mr. Ridley: I entirely agree with my hon. Friend. It is an odd concept that to improve bus services one should forbid small people from coming into the market to provide them. That prohibition should have been removed years ago. Having visited two of the trial areas and heard what has happened, I believe that this new-found freedom


will provide opportunities for many new companies, new small firms which may in due course grow into sizeable companies.

Mr. D. N. Campbell-Savours: Is the right hon. Gentleman aware that we had trial deregulation in the county of Cumbria, following the 1981 Act, when a cowboy operator— Yeowarts— set up and cost me rural routes in the Lake District part of my constituency? Does the right hon. Gentleman recall that on that occasion I was given clear undertakings on the Floor of the House during the Report stage of the 1981 Act that I would not lose those rural routes? I did. Does the right hon. Gentleman accept that everyone outside the House should remember that as the supreme example of the Government's deception in implementing this policy?

Mr. Ridley: I think that the hon. Gentleman will find that we have learnt the true lessons of the Yeowarts experience, and that next time those mistakes will not occur. I think he will find that his constituents get a better and a cheaper service. He would be wise to keep his criticisms until they are proved to be justified.

Mr. David Maclean: May I whole-heartedly congratulate my right hon. Friend on bringing forward these excellent proposals, particularly those which are designed to help transport in rural areas? Will he take special care on this occasion to ensure that county councils which are hostile to private enterprise are not allowed to sabotage these proposals?

Mr. Ridley: I am grateful to my hon. Friend. It shows that Cumbria speaks with two different voices, and I think that his is the right one. In the legislation we shall propose that county councils, in seeking tenders for socially desirable routes, will not be allowed to accept a tender higher than the lowest one, because we are determined that there shall be equal opportunities for all operators.

Mr. Alex Carlile: Will the Secretary of State for Wales or—if he needs a mouthpiece—his right hon. Friend assure us that the Government recognise the special problems that exist in Wales, and in rural Wales in particular? Will he tell us how much new money will be available for services in Wales? Will he assure us that there will be more bus services in rural Wales? Will he assure us that the network will be maintained so that there is easy and efficient transfer from routes owned by one operator to routes owned by another?

Mr. Ridley: My right hon. Friend the Secretary of State for Wales is here, and I am sure that the will wish me to assure the hon. and learned Gentleman that his concern will be taken into account as policies develop. My right hon. Friend is publishing a paper today that will apply to Wales. May I point out that the £20 million annual declining transitional grant will apply to Wales and Scotland as well as to England.

Mr. Peter Snape: Does the Secretary of State accept that his statement this afternoon that passenger transport executives will be required to break down their operations into smaller units is the opposite of the recommendations of the Monopolies and

Mergers Commission inquiry into the West Midlands passenger transport executive—an inquiry set up by his own Department, which praised the operation and efficiency of that PTE? Is it not political vandalism for the right hon. Gentleman to wreck what is, in effect, a proven success?
Does the right hon. Gentleman accept that, as well as the Association of Metropolitan Authorities, the Conservative-controlled Association of County Councils has already expressed its opposition to the market place nonsense that he advocates this afternoon? Is he aware that the president of the ACC is Viscount Ridley, who, I understand, is not the right hon. Gentleman's uncle, but his brother? Will the right hon. Gentleman this weekend take advice from the obviously more sensible side of his family? What effects will the Government's proposals for PTEs have on section 20 grants which are at present paid to British Rail? The Opposition believe that the Nigerians tried to kidnap the wrong Minister of Transport.

Mr. Ridley: The hon. Gentleman put his finger on an important point. He said that, in a public monopoly, we need a monopolies commission to see whether it is efficient and effective or not, but, where there is fair competition, competition does the trick and we then do not need to use the Monopolies and Mergers Commission.
Section 20 grants will continue as at present. It is becoming a very curious world when the Labour party relies upon the House of Lords for so much of its advice.

Mr. Martin Flannery: On a point of order, Mr. Speaker. I wanted to raise a point of order. The fact that you did not take it rendered it irrelevant, as most points of order normally are.

Mr. John Home Robertson: On a point of order, Mr. Speaker. You will have heard the Minister of Transport, when he was replying to a question asked by my hon. Friend the Member for Glasgow, Shettleston (Mr. Marshall), imply that he did not understand the Scottish section of the statement. He said that Scottish Members of Parliament would have an opportunity to put questions to the Secretary of State for Scotland and he pointed out that the Parliamentary Under-Secretary for Scotland was sitting on the Government Front Bench. I wonder whether you have had any notice, Mr. Speaker, that Scottish Members of Parliament are to have such an opportunity in view of the clear statement made by the Secretary of State for Transport.

Mr. Speaker: I have not had any indication this day.

Mr. George Foulkes: ; Further to that point of order, Mr. Speaker. Surely you will agree that as the whole of chapter 7 applies to Scotland—it contains important matters such as that in paragraph 7·13, which foreshadows a major reduction in grant to the rail network in Strathclyde—hon. Members should be given an opportunity to put questions to the Secretary of State for Scotland. Can you arrange for such an opportunity, Mr. Speaker?

Mr. Speaker: Whether statements are made or not is not a matter for me. The hon. Gentleman knows that. The Scottish Office Minister who is present will have heard what has been said.

The Economy

Mr. Roy Hattersley: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important——

Mr. John Prescott: The Prime Minister is leaving. She is running away—frit.

Mr. Speaker: Order. This is unseemly.

Mr. Hattersley: The Prime Minister has gone to look at the indicators. They are down again.
I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the deteriorating economic situation of this country.
That the subject is specific and important cannot be in doubt, as one fact demonstrates. During the last seven days the value of the pound has steadily depreciated, not only against the dollar, but at a faster speed against major European currencies. The immediate consequence of that depreciation has been an increase in domestic interest rates, which is bound to affect inflation, investments, profits and mortgage rates. The failure of the House to discuss these matters would be utterly incomprehensible to millions of families who are desperately worried about their jobs, mortgage repayments and standard of living.
The Third Reading of the Finance (No. 2) Bill—which follows—offers the House no real chance to discuss those matters because in such debates we are required to confine our comments to the contents of the Bill. The fast deteriorating economy requires a far wider forum of discussion than a Third Reading debate allows.
Therefore, Mr. Speaker, I put a simple proposition to you and the House. The British economy is not yet in crisis, but it will be unless some policies are swiftly and radically changed. The House of Commons should have the opportunity to argue for those changes, and to argue for them now.

Mr. Speaker: The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the deteriorating economic situation
—[Interruption.] Order. I am terribly sorry, but the right hon. Gentleman has provided me with a very bad photocopy, which I cannot read.

Mr. Hattersley: With the greatest respect, Mr. Speaker, I supplied you with a quite different copy from the one that you have. However, I am glad to repeat the Opposition's concern, about the deteriorating economic situation of this country, which should be debated here and now.

Mr. Speaker: I shall start again. The right hon. Member asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the deteriorating economic situation of this country.
I listened carefully to what the right hon. Gentleman said, but I do not consider that the matter that he has raised is appropriate for discussion under Standing Order No. 10 and I cannot, therefore, submit his application to the House.

Orders of the Day — Finance (No. 2) Bill

Order for Third Reading read.

The Chancellor of the Exchequer (Mr. Nigel Lawson): I beg to move, That the Bill be now read the Third time.
This has been an important Finance Bill, so I do not complain about the record time devoted to it, especially in Committee upstairs. I pay tribute to my right hon. and learned Friend the Chief Secretary and the rest of the Treasury team—not forgetting the Lord Commissioner—who bore the heat and burden of the days and nights in Committee.
The Bill gives effect to the major changes in taxation which I put before the House when I presented my Budget on 13 March. It was a tax reforming Budget, and this is a tax reforming Bill. However, the Budget was about more than tax. It was also a reaffirmation of the economic strategy which the Government have pursued, without wavering, since 1979. As such, it set the course for this Parliament—and beyond. The Government remain committed, now as then, to defeating inflation, to sound money and to encouraging enterprise, efficiency and competition. The medium-term financial strategy remains the key.
With firm control of public spending and borrowing, and lower monetary growth, we can continue to secure lower inflation and sustain steady growth in output. On that basis, we can look forward to reductions in taxation over the remainder of this Parliament. We remain committed to bringing the burden of taxation back down to more acceptable levels to provide the incentives needed to promote and to sustain higher levels of growth and employment.
The Budget deliberately took the long view, seeking to tackle some of the deep-seated distortions embedded in the tax system, to reform and reshape company taxation and, in general, to encourage enterprise and efficiency and a more productive Britain.
The Budget was also a budget for jobs, not because it espoused long discredited notions of demand management—of course not — not because it pumped money into the economy, which would simply fuel inflation and imperil prospects for growth, but because it was directed at the essentials—at at lower inflation and making the economy work better. In this we have reversed the conventional post-war wisdom of the appropriate roles of macroeconomic and microeconomic policy.
The view once was—and still is, I take it, on the Opposition Benches—that economic growth was to be secured by a macroeconomic policy, notably the fiscal stimulus provided by an inflated Budget deficit, while inflation was to be tackled through microeconomic policies, that is to say, by the panoply of controls, sanctions and subsidies that go to make up an incomes policy, which, as we know, the Leader and Deputy Leader of the Labour party still favour, even though many on their Benches do not.
It is the settled conviction of Her Majesty's Government that the proper roles of macropolicy and of

micropolicy are precisely the opposite of those assigned to them by the post-war conventional wisdom. It is the defeat of inflation, and not the pursuit of growth and employment, which should be the objective of macroeconomic policy, and so it is today, and it is the creation of conditions conducive to growth and employment which should be the objective of microeconomic policy, and not the vain attempt to suppress price rises by controls and subsidies.

Mr. Robert Sheldon: Before the right hon. Gentleman goes further in condemning macroeconomic policy, will he say something about the United States experience, which has been quite satisfactory in that respect?

Mr. Lawson: The United States performance in macroeconomic policy has not been satisfactory. Look at the level of interest rates in the United States, which is one of the matters to which I shall turn in a moment. The United States has indeed been successful in creating jobs, in a way that western Europe has not been, but that is due to its microeconomic policy, to which I shall refer in a moment. Indeed, it is striking that many more jobs were created in the United States during the time when it had a very low Budget deficit than over the past few years when it had a high one.
It is the insight to which I have just referred that has restored the central role of monetary policy, with declining monetary growth in harmony with prudent fiscal policy as the essential means of defeating inflation. This was a truth which I believe was dimly perceived by the right hon. Member for Leeds, East (Mr. Healey) and his fellow pink monetarists when he was Chancellor. Instead of microeconomic policy consisting of even more numerous forms of intervention and interference, its role is now properly seen as allowing markets to work better.
As I said a moment ago to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the United States has demonstrated over the past 10 years that relatively free markets, the spirit of enterprise, and workers who prefer to price themselves into jobs rather than out of them are a powerful engine of employment. It is a lesson which western Europe as whole has yet to learn, and it is that which provides the context for the Government's Budget strategy.
Our tax policy can be simply stated. The tax system should have a broader base so that tax rates can be lower. High tax rates destroy incentives, and a broad base means fewer distortions. Resources can then be allocated by market forces instead of responding simply to the configuration of the tax system. In that spirit, the Budget raised personal allowances well ahead of inflation—by 12½ per cent.—and ended the pernicious 15 per cent. surcharge on those living on investment incomes.
The combination of high rates and special reliefs to which I have alluded encouraged companies to concentrate their efforts on reducing their liability by tax planning, at the expense of pursuing genuinely profitable opportunities. This was particularly marked in investment decisions where the effects of excessively generous first-year allowances could have the absurd result of turning an investment with no pre-tax profit, or even a pre-tax loss, into one with a post-tax profit. As a result, while company investment in Britain is at a level comparable with our competitors, profitability on that investment has been very


much lower. By the time the changes in the Bill are completed in 1986, Britain will have the lowest rates of company tax of any country in western Europe and our capital allowances will be much the same as the average.
The changes that we have made also reduce the bias in favour of capital investment and against jobs—a bias which is unacceptable at a time of high unemployment. To provide a further boost to jobs, we abolished the notorious tax on jobs—the national insurance surcharge—introduced by the Labour Government.
I was greatly encouraged by the response to the tax reform proposals in the Budget. The general structure of these reforms has stood the test of detailed examination in the House of the Finance Bill, and it has not changed during the Bill's passage, but we thought it right to make detailed changes to take account of representations received, or points made in the debates, about the effect on particular industries.
In considering such representations, it is always necessary to strike a careful balance. On the one hand, it may be right to allow for the special situation of some industries as they face the transition to the new system. On the other hand, it is essential not to jeopardise the general structure of the reforms, since one of the defects of our taxation system has been the proliferation of special exceptions and concessions over the years. One tends to lead to another. Therefore, careful judgment was involved. I am satisfied that the Bill has been improved as a result of the changes that we have made.
I shall briefly describe to the House some of the main changes made during the passage of the Bill. First, with indirect taxes, I see the extension of the VAT base as an essential part of the Budget strategy and a necessary counterpart to the reduction in income tax. Moving from taxing earnings to taxing spending gives people more freedom to decide how to spend their money.
We recognised the special difficulties which the standard rating of alterations would carry for listed buildings. An amendment was therefore moved, and carried, on Report for the zero rating of alterations to listed buildings where they required, and have received, listed building consent from the planning authority. I believe that this measure to protect our heritage was widely welcomed in the House and in the country.
Secondly, we have made a number of changes in the new rules governing capital allowances. They are broadly designed to help with the transition to the new system and to allow greater flexibility in the use of allowances. These changes will therefore be beneficial to all industries, but perhaps I should, in particular, say a word about the effect on shipping. This industry operates in a specially demanding international environment. It will now enjoy free depreciation on new ships. This continues into the new regime the special treatment which it received under the old.
Thirdly, I shall mention the concerns of the film industry which have received some publicity. This industry will, as a result of amendments to the Bill, be able to choose between getting capital allowances on the new basis or writing off costs on revenue account against income as it accrues. Investment in British film companies will henceforth be eligible for the business expansion scheme.
Fourthly, and lastly, I shall mention a major change in the treatment of furnished holiday lettings. Again, as a result of amendments to the Bill, these lettings will, if they

satisfy certain conditions, receive tax treatment similar to that given for trades. We have also relaxed the conditions. These changes will bring considerable benefit to a large number of people and have been widely welcomed especially by right hon. and hon. Members representing holiday areas.
I shall now move away from the detailed provisions of the Bill and say a word about the financial markets. This week's rise in interest rates has clearly been a disappointment, in particular to those with mortgages, but such short-term fluctuations cannot, alas, be avoided. However, there is no reason to expect that this will seriously damage the recovery.
At a time when profitability is rising fast and company liquidity is buoyant, higher interest rates are much less difficult for companies to cope with. It is when profits are low that business is vulnerable. Fortunately, our policies and conduct of the economy over the past few years have raised company profits to a greatly improved level. Indeed, profitability rose by 40 per cent. between 1981 and 1983 and is still rising fast.
We have experienced interest rate fluctuations before, and we have surmounted them. The last occasion on which base rates moved to 12 per cent. was in July 1982, and they fell back to 9 per cent. within four months. One thing of which we can be sure, of course, is that if the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), was in office and attempting to put his party's programme into effect, interest rates would be very much higher. They would not be around the same level as American rates, as they are today. They would not even be 4 per cent. higher than American rates, as they were at the end of the period of office of the last Labour Government, two and a half years after the right hon. Gentleman's conversion by the IMF, which would be 16 per cent. or more today. They would be well above that.

Mr. Dennis Skinner: Is the Chancellor of the Exchequer aware that during this Government's period of office the differential between the average interest rate level and the average level of inflation is greater than at any time since the end of the war? That is why he has a problem and why the interest rates might easily go above the 17 per cent. which the Tory Government introduced in its first year of office after 1979.

Mr. Lawson: The hon. Gentleman is saying that inflation under this Government is very much lower than it was under the Labour Government. That, of course, is true, and is one of the most important achievements of the present Government.
The Government's approach to monetary policy is clearly set out in the medium-term financial strategy. The objective is to maintain monetary conditions which will ensure downward pressure on inflation. The assessment of monetary conditions gives equal weight to narrow and broad measures of money. It also takes account of other indicators, including the exchange rate.
We have targets for money, but we do not set targets for the exchange rate or for interest rates. In today's financial markets, such targets are not practical options. There is a worldwide market in money and Governments can no longer set rates by fiat. It can be positively counterproductive to resist strong market pressures of the kind that we have seen in the last few days. That is not to say that there is no scope for Government action, but nowadays


official influence on market rates is more indirect and less a matter of day-to-day movement than it was a decade ago. The result is that interest rates and the exchange rate are bound to fluctuate in the short term in response to market uncertainties and external pressures.
The recent rise in base rates was in no way initiated by the Government, as I think the House is well aware. Rates rose in response to strong market pressures. An important factor has been the high level of American rates, which is widely expected by the market to persist for some time and possibly to increase further. Our rates had become substantially decoupled from American rates, with our rates some 2¾ per cent. lower, but that did not prove sustainable at a time when industrial unrest at home temporarily unsettled the markets.

Dr. Jeremy Bray: With the inability to sustain the disjunction between American and British rates, and with the effect coming through the exchange rate, does the Chancellor of the Exchequer not believe that it would be helpful to make explicit what is plainly implicit in what he is doing—namely, a trade-weighted exchange rate index of around 76 as the effective target of his current monetary policy?

Mr. Lawson: We do not have an exchange rate target. We never have one. Many hon. Members have at various times suggested that whatever happened to be the effective rate of the day was the target, but then it was changed. We have demonstrated by action that there is not an exchange rate target. We have monetary targets. Of course we have taken the exchange rate into account, but that is not the same as having an exchange rate target, which would be folly in the present circumstances.

Mr. Stuart Bell: Are the Chancellor's targets for monetary growth being met?

Mr. Lawson: Yes, we have two targets—for broad and for narrow monetary growth. The narrow target is bang in the middle of the range and the broad target is slightly above the range, although it has been within the range over the past 12 months as a whole. It is far less above the range now than it was at this time last year. The hon. Member for Middlesbrough (Mr. Bell) will recall, as I know he follows these matters, that by the end of the year the figure was within the range.
The current bout of industrial unrest has undoubtedly affected the markets, but it is clear that, despite the attempts of a few determined people to whip up industrial unrest, over the past five years we have dramatically reduced our vulnerability to such disruption. Industrial relations and working practices in the private sector are greatly improved. That in part accounts for the marked increase in productivity. Areas of economic activity which were once under militant union monopoly have eased their way out from under the unions' tyranny.
In the public sector, too, things have changed. The steelworkers have shown that good sense will prevail where union leaders have their members' interests at heart, and workers understand that strike action will succeed only in damaging their own industry, their own jobs and their own families. Many thousands of miners who are now at work have shown equal grasp of that essential truth. Mr. Scargill, having three times failed to win the approval of

his members in a ballot on strike action, has now recognised that a strike can be organised only in defiance of the miners' democratic rights and with the backing of kangaroo courts.
In the last days of the Labour Government it was not just strike action that gave markets the jitters: it was as much the fear of what settlement might be made with the benefit of "Government intervention", as it was called—in other words beer and sandwiches at No. 10. How frequently that Government intervened to guarantee that fundamental problems remained entrenched and unresolved, storing up bitter consequences for the future. How often Labour stepped in to ensure that strikers' pay was increased by more than the country could afford, thus adding inexorably to the gathering momentum of unemployment. That is what happened. Even if, in some quarters, the reality has been slow to dawn, the truth is that all that has substantially changed.
Meanwhile, I see nothing in the domestic monetary situation to justify a sustained period of interest rates at this level. The June money figures were disappointing—that is broad money, as I mentioned to the hon. Member for Middlesbrough. However, it is never wise to put much weight on one month's figures. MO, one of the two main measures of money, to which we give equal weight, is performing well, by any standards. The year-on-year growth in sterling M3 is less than 10 per cent. and growth over the current target period has so far been less than it was over the comparable period last year. On that occasion, we ended up well within the target range over the year as a whole.
In spite of what has been suggested, the exchange rate is not giving a different message. There is no lack of confidence in sterling. The dollar has been exceptionally—indeed, many would say absurdly—strong against all leading currencies. The deutschmark-sterling rate is now around the same level as it was at the time of the Budget and more than 5 per cent. above the low point reached in March last year. Moreover, inflation is well under control, and Monday's producer price figures confirmed the indications from the latest CBI review.

Mr. J. Enoch Powell: As the right hon. Gentleman has returned to the subject of the exchange rate and interest rates, will he account for the fact that the movement in the exchange rate is not an alternative—instead of additional—to the adjustment of domestic interest rates, or is it his view that the movement of the exchange rate has not fully offset the effect of American interest rates?

Mr. Lawson: It is a matter of the market's view of whether the exchange rate has offset the movement in interest rates. It is not a matter of my or the Government's view. The point is that in recent days there was considerable pressure on domestic money market rates, which had pushed them up well above the rate which validated the bank lending rate. It was that pressure to which the banks eventually had to respond. When the market can take a more dispassionate view of the United Kingdom situation, I have every expectation that the fundamental soundness in the economy will be reflected by a resumption of the trend towards lower interest rates. The policies which I outlined in the Budget provide the best way to put us back on that trend. No doubt the Labour party will try to portray this week's disappointing news on interest rates as a serious setback to the recovery.
On television last night the right hon. Member for Sparkbrook gleefully set about what he is best at—running down his country and urging investors to take their money elsewhere because what is bad for Britain is good for the Labour party. Fortunately, the economy is in sufficiently robust health to take in its stride both the rise in interest rates and the effusions of the right hon. Gentleman. How different that is from the situation under the Labour Government. We all remember the right hon. Member for Leeds, East executing a U-turn at Heathrow, cancelling his visit to the annual meeting of the International Monetary Fund and the World Bank and scurrying back to try to regain control. We remember, too, the humiliation to which this country was subjected when the IMF told the Labour Government that they would have to adopt responsible economic policies before we could qualify for another cent of credit.
This Finance Bill confirms the course that we have set towards the steady improvement of the workings of the economy. What, by contrast, does the Labour party now offer? The red party has become the scarlet woman, Walworth Road Lil, obeying every whim of her militant trade union sugar daddies, a party now so enslaved and dependent that it cannot even summon the breath to condemn the savage violence inflicted on trade unionists who want to work and on their wives and families by the bullies who fear the ballot box. [Interruption.] Labour Members do not like that. They cannot take the truth, because it hurts. How well the right hon. Member for Sparkbrook epitomises his fallen party. Every now and then he shows a flicker of his hidden conviction and even the faintest hint of courage, but then once again he feels the twitch on the thread and he is back in line, condemning miners who wish to go back to work and assuring his party that however extreme its manifesto at the next election he will support it.
We look forward to hearing in a few moments an all-to-rare contribution from the right hon. Gentleman to our discussions on economic matters, but I doubt whether he will have much to say about the fundamentals—the fact that inflation is down to 5 per cent., growth is robust and has continued at an annual rate of about 3 per cent. since the trough of the recession in 1981, and profitability has increased sharply and is still rising. As a proportion of GDP, industrial and commercial companies' gross trading profits net of stock appreciation are at their highest level since the early 1960s. Investment has moved steadily ahead since the trough of the recession, rising by 11 per cent. across the whole economy in the six months to March and the investment intention surveys show that that trend is likely to continue strongly in the coming year. Productivity in manufacturing has risen by an unprecedented per cent. per year for the past three years and now stands about 13 per cent. above its pre-recession peak.
Against that background, there is no question whatever of our changing course. The turbulence of markets comes and goes like bad weather, but we shall see it off. The industrial unrest at home, for all the encouragement that the Opposition may choose to give it, will not succeed in undermining the soundness of the British economy. The Government have a clear and consistent strategy based on firm control of public expenditure, lower Government borrowing and a proper monetary discipline, and a strategy for lower taxation which leaves people with more of their own money to spend as they wish. This Finance Bill

begins the task of reforming and simplifying the tax system and reducing the tax burden to more acceptable levels. It raises income tax personal allowances to their highest real level for more than a decade and puts company taxation on a sound footing for the future. I commend it to the House.

Mr. Roy Hattersley: rose——

Mr Speaker: Before I call the right hon. Gentleman, I should like to say that earlier this afternoon I accused him of providing me with an indifferent photocopy of his application under Standing Order No. 10. I have now seen his original letter, which is quite distinct. I apologise to the right hon. Gentleman for a mistake which was mine, not his.

Mr. Hattersley: Thank you, Mr. Speaker, for those words, which, as the House will agree, are typical of your conduct, but which nevertheless are a welcome demonstration of how we should all behave when we make the occasional error.
Having expressed my genuine admiration for your response to that small error, Mr. Speaker, I must say that the Chancellor of the Exchequer has responded to his immense errors exactly as I would have expected. If the only people who had lost confidence in the Government had been the members of the Labour party, the Chancellor of the Exchequer could indeed have continued to swim along in the sea of complacency that characterises all that he does. But the people who are saying that the economy is deteriorating—and deteriorating fast—are not simply those on the Opposition Benches.

Mr. Lawson: indicated dissent.

Mr. Hattersley: The Chancellor shakes his head. That must be because, as the Prime Minister often says at Question Time, we cannot all be well informed. At 4 pm today, the Press Association reported that
Governments faced major collapse of confidence in the City as price of leading shares crashed following two per cent. rise".
The Chancellor must understand, if he is to have the remotest hope of putting right some of the errors which he has perpetrated, the nature of the loss of confidence in his policies and what he stands for. Before I deal as best I can with the contents of the Bill—as is normal on Third Reading—I should like to spend two or three minutes explaining to the Chancellor the nature of his errors and the tragedy which faces this country if those errors are persisted in.
First, the pound has been depreciating against the dollar for a very long time. Throughout that period of depreciation, my right hon. and hon. Friends and I have never once raised that issue with the Chancellor or the Treasury Bench as being a matter which was their responsibility and for which they were properly to be blamed.
I have not shared the Prime Minister's beliefs about the reason for that depreciation. The right hon. Lady has always said that the depreciation of the pound against the dollar was wholly the result of the United States deficit, and the interest rates in the United States which had been raised to finance that deficit. The Prime Minister would be right to attribute part of the depreciation to that, and since it was at least part of the cause the Opposition have never thought it right to say that the Government's record


on the depreciation of the pound against the dollar was leading this country to ruin. Remembering the right hon. Gentleman's conduct in opposition, I am sure that if under a Labour Government the pound had sunk from 2 dollars to 1.30 dollars or just above, the right hon. Gentleman would have been performing in the House day after day undermining confidence just as he now accuses the Opposition of doing.
The right hon. Gentleman talks about the Opposition talking down the pound, and glorying in the failures of the country. To accuse the Opposition of talking down the pound and rejoicing in discomfiture has been the refuge of panic-stricken Chancellors down the ages. The blame lies with the right hon. Gentleman and with the policies that he follows.
Had nothing happened in the past 10 days apart from the depreciation of the pound against the dollar, no one would have wished to discuss these matters this afternoon or believed that the country was facing an incipient crisis. We would have said—as we tried to say at the time—that if the dollar was moving up, and if it was the result of the United States deficit, and if it was caused by interest rates in the United States being too high, it would have been sensible for the Prime Minister to have used the London summit not as a public relations exercise but as an opportunity for the industrialised countries to come together in a compact to end the difficulties brought about by the American deficit.
The Prime Minister did not want the London summit to take that form. Indeed, she prevented the Prime Minister of Canada from raising those matters when he tried to do so. The Chancellor will remember the day. It was the day on which he accused the Secretary of the United States Treasury of being weak-minded.
The London summit was arranged as a public relations event, and if the Government now claim that our problems are all the responsibility of the American deficit and American interest rates, it was criminally irresponsible of the Prime Minister to do nothing about those subjects when she had the chance. The Chancellor ought to understand the difference that has come about in the past week. That difference is that the pound has begun to deteriorate against the effective exchange rate—the average of European currencies. That has happened because the money markets, the people about whom the Government are supposed to know, with whom the Government are supposed to work and who the Government represent, have lost confidence in the Government's policy.
The Chancellor says—in part I concede that he is right— that part of the problem is the result of the dispute in the coal industry. Of course it is. There cannot be a 19-week strike without there being an effect on the economy, especially if it results in the British Government and British oil companies selling less oil abroad to keep more in Britain to run power stations. If the strike results in our importing more oil and exporting less and all sorts of adjustments to industrial production, output and exports, of course it will influence international confidence. That is one of the reasons why the Opposition think that the Prime Minister should have used her good offices to bring the dispute to an end rather than use her pressure to keep it going in the hope of having a knockdown, drag-out victory over the miners.
The Chancellor says that the dispute in the coal industry is partly to blame. He must not think that the Opposition or the country think that that is a criticism of the Labour party, for it is a criticism of the Prime Minister for allowing it to go on far longer than necessary. If the crisis is caused by the coal dispute, it is caused by the Prime Minister's instructions to the chairman of the National Coal Board.
I want to tell the Chancellor something else in this, I regret, ugly part of my speech. He said that other disputes have had an effect on confidence. I do not think that the docks dispute will have the type of effect on our economy that was once the case. When the Labour party was in power and the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) was Chancellor, he and other Labour Chancellors presided over docks disputes that had a disastrous effect on the economy because we then exported more manufactured goods than we imported. Docks disputes prevented our exports from being sent abroad. Under the present Chancellor, the docks dispute has quite a different effect as we now import more than we export, so the result of a docks dispute is a halt to disastrous imports coming in.

The Chief Secretary to the Treasury (Mr. Peter Rees): Earlier this summer, the right hon. Gentleman said that if he had been a Nottingham miner he would have been on strike. If he were an Immingham dock worker, would he now be on strike?

Mr. Hattersley: What I said about being a coal miner applied exactly and entirely to the rules that I should apply if I were a member of any of those trade unions. I happen to have a strong view of loyalty. It is one of the things that the Chancellor holds aginst me. He says that I am never prepared to rebel against my party, by which he means that I am perpetually and permanently loyal to the Labour party. I plead guilty on all charges. I should be in exactly the same position with my trade union. What I said about the coal mining dispute I meant and I repeat. If there were an official dispute and I was called out on strike, of course I should come out on strike.

Mr. Tony Baldry: The accusation that Conservative Members make is that the loyalty of hon. Members such as the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) is that they have a loyalty to the Labour party but none to the country.

Mr. Hattersley: I propose to treat that trivial intervention with the contempt that it deserves. My vision for Britain is of a more equal society. The Labour party is the only possible instrument by which that can be achieved. That is my definition of patriotism, which concerns the Labour party's success and prosperity.
The Chancellor does not understand the circumstances of the past 10 days during which confidence has disappeared. I said that he does not understand. I suspect, however, that he does understand but that he does not take it sufficiently seriously to tell the House in all honesty what he fears. In his less guarded moments he admits that there is a crisis in the markets. After an intervention he spoke of the markets being able to take a more dispassionate view of what is happening. He knows that that confidence is not present, for three or four specific reasons.
First, there is the effect of the dispute and the feeling of fear throughout those countries where we have creditors


that the Prime Minister is less concerned with running an efficient economy than with striking a pose of belligerence, toughness and unyielding character.
Secondly, the consequences of the coal dispute have demonstrated to our creditors what the British economy will be like when permanently we cannot export oil and permanently we import it. In a few years, the great boom, the unconvenanted benefit that has kept this country out of bankruptcy over the past five years, will be gone. People realise that the oil is likely to run out and the circumstances of the coal mining dispute will be repeated month by month and year by year.
Thirdly, there is growing understanding that the Government are not concerned with the real economy, the underlying economy, the need for investment, growth, employment and exports.
The Government are obsessed with numbers. Again today the Chancellor treated figures such as the money supply as if they were mystic symbols out of the Old Testament. As long as we pay obeisance to them, everything will go right. If he has not learnt this week that everything will not come right simply by applying these formulae, the conditions and prospects of the country are desperate.
I propose, if you will allow me, Mr. Deputy Speaker, under the new rules governing debates for Third Readings, to return, at least in passing, to the economic implications of the Bill, what the Chancellor proposed in the Budget, and what has been debated so long and hard in Committee. Neither the Chancellor nor I were members of that Committee, but I pay tribute to my right hon. and hon. Member Friends who fought the Bill clause by clause for a record time with determination as well as lucidity.

Mr. Peter Rees: That is one way of describing it.

Mr. Hattersley: Well, at least none of my colleagues went to the leader of their party and whined that they had been treated badly by the other party.

Mr. Peter Rees: Substantiate that.

Mr. Hattersley: That report appeared in a most reputable newspaper. If it is not true, the right hon. and learned Gentleman has the right, and the duty, to protect the Prime Minister as well as himself and write to that newspaper to make it clear that he never made such a complaint against Labour Members.
I repeat my tribute to my right hon. and hon. Friends and I remind them, the House, and the Chief Secretary of the circumstances in which they debated the Bill. They debated it in the terms set for it by the Chief Secretary himself in the Second Reading debate, in which he said that the Bill
shows a firmness of purpose on financial strategy".—[Official Report, 10 April 1984; Vol. 58; c. 248.]
He then went on to particularise the Government's determinations—to reduce the rates of monetary growth and public expenditure, and to reduce the pressure of inflation and interest rates, and so provide financial stability.
Those are the claims with which the Bill began its passage through the House. It ends its passage not with a reduced rate of monetary growth, but with a growth in the money supply that is 40 per cent. above the targets on one indicator and 6 per cent. above another. It ends its passage not with a firm reduction in inflation but with an anticipated increase. It ends its passage not with reduced

interest rates but with increased interest rates, and not with economic stability but with the uncertainty and lack of confidence that the stock market and the international exchanges now demonstrate.
I hope that the Chief Secretary recalls the phrase
a stable currency is a pre-condition of more general economic stability".
It comes from the guide to Tory candidates circulated during the last general election campaign. There may be some poor, misguided Tory Members who fought their seats on that promise of financial stability, who will now trail into the Lobby as if the promise has come true. We all know that, despite that promise, the strategy on which this Finance Bill is based is a clear failure by any standards. It is a clear failure by our standards because it does not take into account the principal moral imperatives of any decent economic policy — the need to reduce unemployment.
I am delighted that the Prime Minister is still in her place. When she went through, at her usual panic speed, the Government's economic achievements in the past five years, she said not a word about unemployment. Some things may have improved, but employment has spectacularly deteriorated. The great condemnation of the Government and their economic strategy is that they have no plans for, or interest in, reducing overall umemployment. That is to judge the Government by our standards. To judge the Government by their own standards of the money supply and interest and inflation rates, their strategy is in a shambles.
I shall qualify that statement at once. The economic strategy of the Conservative party is an overwhelming success in one particular, which has been reinforced by the Finance Bill. The Government are determined to redistribute income from the poor to the rich. That part of the Government's economic policy has been triumphantly successful.
Let me tell the Chancellor how that has come about. He has increased the overall burden of taxation, as did his predecessor for five years. The Chancellor shakes his head. Does he not agree with that assessment? The Financial Secretary is always telling us in written answers, as his most recent written answer confessed, that the overall burden of taxation in the past five years of Conservative government, since the day when Labour left office, increased by £22·5 billion.
It is pernicious that much of the additional burden is carried on the shoulders of those who are least able to pay. We all know that the only recipients of tax relief under the Government are men and women, or families, with substantial earnings. The Finance Bill has reinforced that trend in little, mean ways.
The Government have introduced VAT on take-away food and home improvements. The tax will fall disproportionately on the lower paid. If I had to think up a little package of measures that typified the meanness of the Bill, I would think of VAT on fish and chips, which is perhaps matched by the abandonment of investment income surcharge. I would think of the Chancellor's pretence that he had done something for the poor, in the chortling and cheering that he induced on Budget day by saying that he had knocked rather less than 1p from the price of a gallon of paraffin. That is the measure of the Budget's shoddiness.
The debates about VAT in Committee and elsewhere have done nothing to convince the Opposition that the


uncertainties we fear and feel about the future of VAT in this country are unreasonable and will not one day be shamefully realised.
We have not had a proper assurance about VAT on food. We continue to ask for an assurance—not in the Finance Bill today, but in the lifetime of this Parliament—that VAT will not be put on food. We do so in the light of the Chancellor's obsessive desire to do what he coyly calls widening the tax base and in the Prime Minister's craven agreement to increase own resources to the European Economic Community. The conjunction of those two factors must lead us to fear the extension of VAT to food. Until the Chancellor or the Prime Minister is prepared to tell the House and the country that VAT will not be levied on food in the lifetime of this Parliament, our reasonable suspicions will remain.
What is more, that is an example of the movement of tax benefits away from the poor and towards the rich, and of the tax structure as it affects direct taxes. The Government have failed to alleviate poverty, as they might have done. At the same time, they have given enormous concessions to men and women in higher income groups. We have compared time after time the reduction in income tax allowance by 12·5 per cent. with the increase in child allowance of no more than 5 per cent.—less than half that amount.
Every hon. Member knows that when the child allowance was replaced by child benefit the idea was that the benefit should be adjusted at Budget time so that the recipient would get more or less what she would have got if she had been receiving child allowance and it had been indexed. Yet the Chancellor chooses to discriminate in favour of the direct taxpayer—and, therefore, discriminates most in favour of those who earn most—and against the family.
Our criticism of the direct tax structure that the Chancellor proposes is also a criticism of his proposals on company taxation. He rejoices in the abolition of the national insurance surcharge. I also rejoice, and I give him that little victory. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) pressed for the abolition a year ago, my right hon. Friend the Member for Leeds, East (Mr. Healey) introduced the surcharge six years ago, I welcomed the abolition on Budget day, and I welcome it again now.
However, it is wrong to pretend that the abolition of the surcharge will compensate for the other things that the Budget has done to reduce employment. I give one example. There was much rejoicing on the Conservative Benches yesterday over the reduction in corporation tax. However, when that reduction is set against the removal of capital allowances, industry will be paying more as a result of the Budget, at least in the short term—this year and next year. If one adds that to the amount that will be charged to industry as a result of the imposition of VAT on the work involved in house improvements and alterations, one sees that the net effect of the Budget, at least for the next two years, is more likely to depress employment prospects than to enhance them.
The change on corporation tax, balanced by the removal of capital allowances, will work adversely against industries that are most in need of assistance—the new industries which are developing and want to invest. They

want to install new plant and machinery to create more jobs, but they are on the margin of profitability and the Budget has penalised them.
The tragedy of the Budget is not simply its content but the framework within which it operates. That framework is doomed to failure, because it is concerned not with the realities of the economy but with the myths of the economy. The Chancellor persists in his stubborn view that if he holds the monetary aggregates to figures that were conjured out of the air and called the medium-term financial strategy, everything will automatically come right. It will not, even if the right hon. Gentleman hits his targets. But he does not and cannot hit those targets. What will he do when his target is not hit? He will go in again for the same old dreary round of cuts and squeeze in the belief that he can eventually improve economic activity by reducing it in the short term.
Everybody knows—even though the Chancellor denied it today—that an operation is going on in the spending Departments to ensure that there will be less spending than was previously planned.
The Secretary of State for the Environment was asked by one of my hon. Friends about a capital moratorium. The right hon. Gentleman said in a written answer that he would be making a statement shortly. I suppose that it is possible that that Secretary of State will come to the House to say that he has nothing to say. But that is unlikely. The implications are clear: capital works in the public sector are soon to be cut again.
The Chancellor still believes that every time that he is blown off course he can swim back by cutting public expenditure, increasing unemployment, paying more in unemployment benefit, putting more pressure on the public sector borrowing requirement and keeping the hurdy-gurdy going round and round.
I said earlier that the tragedy of the events of the past 10 days was that the confidence that we should be enjoying, having benefited from the unconvenanted boom of North sea oil—a benefit which no other British Government has enjoyed—has been lost by the Government. I revise that opinion now. The real tragedy is that the Chancellor of the Exchequer and the Prime Minister have clearly learnt nothing from the events of the past week, and the same dreary deterioration will go on and on until the Government are removed.

Mr. Roy Jenkins: This is a year, if ever there was one, to recall the old adage of Iain Macleod: that if a budget looks good in March—I add if it was bouncily presented in March—it will almost certainly look bad by July. That is not always true. Nor is the converse, which was also propounded by Iain Macleod: that if it looks bad in March, it will look good by July. The Foreign Secretary's budget looks pretty drab in every season of the year.
The Chancellor came to the House and presented his Budget like a resplendent spring bird with a good deal of strutting self-confidence. I congratulated him on his lucid presentation and even on some of its substance. However, I also said that it was frivolous about the central problems of the economy. Today that frivolity is increasingly self-evident. However much the Chancellor tries to shrug it off, he cannot convince anybody but himself.
There is no doubt that our financial management is in a mess, and a worse mess than in any comparable country


in our interdependent world. We have a reeling currency with much more of a shadow over its future than over Monsieur Mitterrand's French franc. Our interest rates are far higher than those in Germany, and we have a much higher rate of inflation. The Chancellor particularly put forward low interest rates as the Budget's special contribution to industry and said that they were far more important and valuable than a stimulus to public sector investment in its impact on the industrial prospects. Yet we have less growth and fewer jobs than the United States and we have a more dangerous base of unemployment, from which to go into a possible recession than any other country, except perhaps Belgium and Ireland. A comparison in any respect with Japan hardly bears thinking about. In addition the money supply, especially the PSL2—the broad money—is way off target.
All those considerations are of varying importance. I have never believed that it was possible to get them all right at one time, but to get them all wrong at the same time requires incompetence on an awesome scale. That is precisely what the Chancellor has done. The Chancellor seemed almost to be arguing in a statement last night that the pound was not too low and perhaps should go even lower, and that no one should be perturbed about its recent collapse. If that is his view it does not say much for the effect of the Government's policies upon the level of British competitiveness or for the sense of previous exchange rate policies.

Mr. Lawson: I should make it clear that that is not my view. The right hon. Gentleman made comparisons with other Community countries, and he has a distinguished record in the European Community. Would he, in all fairness, agree that last year Britain had the highest rate of growth in the Community and that the Commission's forecast is that this year Britain's rate of growth will be second only to that of Germany?

Mr. Jenkins: I made a comparison with the rate of growth and the creation of new jobs in the United States. My comparisons on the rate of interest in Germany, the rate of growth in the United States and other matters were all strictly accurate, and the Chancellor does not deny that. However, he is not now saying that the pound is too low. He appeared to say yesterday that there was no need to be perturbed about the recent collapse in the exchange rate level of the pound.
It is also possible—I am not sure whether it is the Chancellor's view—to take the view that Governments or central banks should do nothing about exchange rates. That is a mistaken policy, and I do not believe that it is the right hon. Gentleman's view, whatever he may proclaim in public. In view of the attachment which the Government have proclaimed to low interest rates, and if the Chancellor believes that the Government and the central bank should not be concerned with exchange rates, it is by no means clear why interest rates have increased twice during the past six days. Nor is it clear why, as the hon. Member for Bolsover (Mr. Skinner) said in one of his more sensible interventions—it was one of his rare interventions, delivered on his feet—the real rate of interest of 7 per cent. is at an historically high level.
It is impossible for anyone except the Chancellor to deny that the reaction to the problem by the Government or the bank, or the two in combination, has been extremely clumsy during the past week. There are two rules when

trying to deal with such a problem: first, if we must move, we must not do it too late; and, secondly, when we move we should not do too little and then have to do it again. During one week the Chancellor has broken both rules. First, he moved rather too late and clearly not enough and, secondly, he had to move by another two points within four days. There is no question but that the Chancellor has broken both rules, and his approach during the past six days has been bumbling.
Then there is the Government's unamiable tendency, some of which springs from the personality of the Prime Minister, to blame everyone but themselves for everything that goes wrong. They blame the United States for having high interest rates. We all wish that they were lower, but America's massive structural deficit and Mr. Volcker's method of dealing with its consequences are not new factors. They were wholly predictable before this week, although, if anything, the Chancellor predicted them wrongly. He said that world interest rates would fall. Mr. Reagan is supposed to be the Prime Minister's best friend and, to some extent, her financial apprentice—at any rate, she hoped that he would be. The reason why the undesirable but predictably high United States interest rates hit Britain so much worse than they hit Germany is the inherent weakness of our economy which the Government, contrary to their protests, have deepened and not in any way cured. Sterling will have a rough ride during the next few years.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) put his finger on it when he said that it would have a rough ride when the market took more into its consciousness what the position of Britain would be when the oil had gone—a time not far distant—and it was replaced by an oil deficit.
The tendency of this Government is to blame everybody — strikers included—but themselves. I do not take exactly the same view of the strike as the hon. Member for Bolsover but it is clear that the Government welcome industrial confrontation——

Mr. Skinner: rose——

Mr. Jenkins: I will not give way. I am anxious to conclude my remarks.

Mr. Skinner: Did not the right hon. Gentleman agree with the Leader of the SDP and attack the strikers?

Mr. Jenkins: I agree with the Leader of the SDP on all issues, as I am sure the hon. Gentleman knows.
As for the irrational market forces about which the Chancellor was complaining this afternoon and which he hoped in time would take a more dispassionate view of circumstances than they do at present, it was not long ago that this Government were almost claiming to have invented market forces, or at any rate to have set them free and given them their proper role.
Hence, we have the position of this unerring Government beseiged by an improbable conspiracy of President Reagan, Mr. Scargill and malevolent market forces, all of which does not quite seem to add up or to ring true. It was not market forces, Mr. Scargill or even Mr. Reagan which put the right hon. Gentleman, with his blustering maladroitness, in the position of Chancellor of the Exchequer. That was done by the Prime Minister, who excluded many wiser people on grounds of ideology, not of competence.
Although market forces did not make the right hon. Gentleman Chancellor—and I do not know what he would say about his recent performance if he were writing as financial editor of the Sunday Telegraph, which he once did—ironically, market forces may bring his meretricious Chancellorship to a fairly early and inglorious end.

Mr. Tony Baldry: It is a distasteful experience to hear so many Opposition Members trying to dance on the grave of Britain. I remind the House that yesterday Sir Terence Beckett wisely said that the chief cause of the latest rise in interest rates was external. He went on to say that our underlying situation was one of steady growth and low inflation. One cannot reconcile that view of the president of the CBI with anything that we have heard this afternoon from the Opposition Benches.
As the hon. Member for Banbury, it is not surprising that I wish to deal with the question of agriculture. I recognise that the Budget did a considerable amount to assist agriculture in Britain. It increased the basic thresholds, abolished the investment income surcharge, reduced the top rate of capital transfer tax and increased the development land tax threshold.
However, as my hon. Friend the Financial Secretary has recognised, farming, by its nature, does not incorporate, and thus agriculture is likely to be seriously affected by the switch as between corporation tax and capital allowances, something which everywhere else is to be welcomed as encouraging jobs. My request to the Chancellor is that during this year he should monitor the effects of that change on agriculture, and if it is seen to hit agriculture particularly harshly, he should, in next year's Budget, make an exemption for agriculture in relation to capital allowance reliefs.
The other small matter that I want to urge upon my right hon. Friend is that at a time when many British farmers are experiencing difficulties not of their own making as we rightly seek to grapple with the problems of overproduction of milk, while I recognise the concessions that were made yesterday in relation to stock relief on a herd basis, none the less there is still much more that can be done. We should recognise that as many dairy farmers will have to get rid of somewhere between 10 and 20 per cent. of their herds, to have to be taxed on such disposals not unsurprisingly makes them feel slightly hard done by. Although there is some small justification for that, it would be a measure of generosity if the Exchequer were to consider a one-off concession at some stage during the coming year to give some assistance to such dairy farmers.
Like, I suspect, every other Conservative Member I warmly welcome the Chancellor's Budget and soundly deprecate the tactics that are being advanced by the Opposition, who constantly seek to talk down Britain. One imagines that they would only be happy and smiling if all British industry were brought to a halt by the dock and mining disputes. I suspect that that is the only thing that would give them cheer. To those of us who are confident and believe that the Government are on the right track, I simply say on behalf of British agriculture that I hope the Chancellor will give close attention to how it fares during

the coming year to see whether the balance is right and perhaps to make any necessary adjustments in his Budget next year.

Mr. Stuart Bell: I am grateful for the opportunity to follow the hon. Member for Banbury (Mr. Baldry). I hope to lay to rest what is obviously a political ploy of the Government somehow to distort the crisis and make it into a situation where the Labour party, either through its Front Bench or in the country, is seeking to talk down the pound, to the detriment of Britain. We shall not be deflected by such arguments from the serious nature of the crisis—as we would call it—which has afflicted the markets—as the Chancellor would call it—by that kind of language. When the hon. Member for Banbury intervened in the speech of my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and asked him about his loyalty to the Labour party as opposed to the country, my right hon. Friend answered him aptly. I repeat that they are not mutually exclusive. Loyalty to the Labour party does not disavow loyalty to Britain.
None of us in the debate and who have followed the 150 hours of the Committee stage of the Finance Bill have anything other than care, compassion and concern for the fate of our country and for the 6 million house owners who tomorrow will learn what the rise in the mortgage rate will be a direct consequence of the Government's policies. I say that advisedly, because yesterday the Government had two options available to them. One was to allow interest rates to take the strain of what was happening in the United States. The other was to allow the Bank of England to intervene. The Government chose not to allow the Bank of England to intervene, but rather to place the burden of what was happening in the United States upon the British people. That was a choice which the Government made, which they will have to live with. Unfortunately, it is also the choice which the British people will have to live with.

Mr. John Maples: If the Labour party had been responsible for the situation, would it have let the pound slide and done nothing about interest rates?

Mr. Bell: I shall not pursue that avenue of Conservative propaganda at the moment. When faced with a crisis, Conservative Members ask what we would have done. I shall not do so for two reasons. First, we are not in government, and, secondly, it becomes rather stale to refer to what the Labour party did from 1974 to 1979 when we have a Tory Government which is going into its sixth year. We shall not allow the public to be deflected into considering what we would be doing because we are not in office.
We lay the blame for the present economic difficulties fairly and squarely at the Government's door, and we shall not be deflected from that. We shall tell the people why their mortgage rates and the cost of living are going up. We shall tell them why the inflation rate that was forecast by the Chancellor in his Budget statement of 13 March will not be achieved. We shall let the people know who is responsible.
The Chancellor of the Exchequer has a belief in the market, and it is reflected in everything that he says. It is reflected in what he said when he was asked about a target


for the exchange rate and said that there was no such thing under this Government, and that the market, as he perceived it, would fix the target.
The target of the present situation is that what the Chancellor of the Exchequer believes of the market is not what the market believes of the Chancellor. The Chancellor consistently, even in reply to my intervention this evening, refers to the MO, or "Little Mo" as I call it—the definition of money supply based mainly on currency—and says that that is on target. He was a little more reluctant to say that the M3 target, now running at about 14 per cent., was the yardstick of the City of London. The City of London does not look, as the Chancellor does, at "Little Mo"; it looks at M3. The City sees the Chancellor's Budget target being overshot, and although the Chancellor may hope that that overshooting will regularise itself between now and the end of the year, it is what the market perceives the monetary target to be that really counts.
The Bank of England has taken, and continues to take, the view that if monetary aggregates rise too fast, the strain must fall on public expenditure, so there may have to be public expenditure cuts. The City of London's perception of the market is different from that of the Chancellor, and that is what has brought us to the pass in which we now find ourselves. If the market perceives that there is an overshoot in the money supply, public expenditure cuts become a self-fulfilling prophecy.
The Chief Secretary, at Question Time today, did not entirely rule out, nor could he, the possibility of public expenditure cuts in the future—even in the imminent future—depending again on how the market preceives the money supply and on what is happening in the United States. Those are the real criteria which the markets and the City of London will be considering.
The Chancellor of the Exchequer said that somehow we had decoupled our interest rates from those of the United States. It was my feeling at one stage during this year that the Government were congratulating themselves on decoupling our interest rates from those of the United States. Now the Government are saying that they regret the decoupling, and that it is because of the difference between our interest rates and those in the United States that our rates must rise. It is the British taxpayer, through what happened yesterday and what will happen tomorrow, who will make his own contribution to the United States Budget deficit. We say that it is a wrong philisophy, a wrong way to look at the question, and the wrong consequence for our people.
The Chancellor of the Exchequer referred to macroeconomic policy and to microeconomic policy. He referred extensively to his speech on the occasion of the fifth Mais lecture on 18 June. What he is really saying is that he has dismantled macroeconomic and microeconomic concepts and has replaced them with uninhibited, unbridled and unmitigated market forces and monetarism. The Chancellor of the Exchequer will not countenance that deficit spending really works. He always turns against what is happening in America and says that it cannot be done here.
The right hon. Gentleman calls it the United States conundrum and regards as heresy the concept that deficit spending will create jobs. If he were to accept that deficit spending would create jobs, the basis of the Government's policy would be destroyed. Therefore, he looks, as he suggested during his speech at the Mais institute, for other

phenomena. He talks of the unique position of the dollar as the world's reserve currency. The concept in the 1960s was that a reserve currency in the form of the pound sterling was a drag weight upon the British economy. It is now being said that the United States dollar is a world currency reserve and that that is the source of and explanation for the massive expansion of the United States economy.
The Chancellor took the view in his Mais lecture, in his new-found definition of macroeconomic policy and microeconomic policy, that macroeconomic policy goes to the conquest of the inflation, while microeconomic policy goes to the conquest of unemployment. The reality, as we see in our daily lives, is entirely different. The Chief Secretary intervened in the speech of my right hon. Friend the Member for Sparkbrook and referred to Immingham. The policies which the Government are seeking to follow are designed to remove restraint, and the issue at Immingham is the removal of the dock labour scheme. The scheme is considered to be a restraint, but its removal will not lead to more employment. Its passing is likely to make men at Immingham out of work, which is why there is a strike.
If it is the Government's policy to accommodate inflationary pressures—the phrase was used by the Chancellor in his Budget speech—why did the Government not allow the Bank of England to step in and maintain the value of the pound, rather than allow interest rates to do the job for them? As I have said, it is the Government's intention that the British people, not the Bank of England, should take the pressure.
The Chancellor said during his speech at the Mais institute in the City that the climate was changing. That speech was made on 18 June. Certainly the climate is changing. The Government have challenged the bastions of trade union and local government power. The Chancellor referred to that when he talked about militant union monopolies. The Government thought that they could deprive Cheltenham trade unionists of their rights, that they could deprive miners of their jobs, that they could ride roughshod over their own Back Benchers and that they could do the same to the leaders of the Liverpool city council, the GLC and the metropolitan authorities. All these areas of conflict and challenge were of the Government's own choosing, and even on the grounds of their choosing they have fled from the battlefield leaving their rhetoric behind them.
The miners' strike has entered its 19th week and the Government have been beaten into a compromise at Liverpool. The ponderous weight and authority of the other place ensured that the Government reversed their decision to abolish free elections. This is what the Chancellor describes as the climate of change. In the eyes of the Government, it is clearly change for the worse. The goals of the former Chancellor, who is now the Foreign Secretary, were boldly and nobly taken on by the present incumbent.
As the right hon. Gentleman said in his Mais lecture, the goals were to conquer inflation and to restore the British economy to growth and prosperity. We are witnessing the consequences of a policy which is entirely unbalanced. It is a policy which I would describe as a cloak of many colours, and the cloak is tattered if not bloodstained. If there are marks upon it, they must be the marks of tears of those who have lost their jobs as a result of the medium-term financial strategy.
The Government have failed to understand the impact of their own policies and the very inflation which they seek to curb. The pound is falling like a stone through the floor of credibility. This will make North sea oil more expensive as well as other raw materials that are used for manufacturing purpose. The consequences will seep through into interest rates and act like a hypodermic needle that is shot into the skin, thus pushing up the cost of borrowing and mortgage interest rates and destroying the Chancellor's target for inflation at the end of the year. It is not that the Government are off course; it is that they do not know that they are off course. They persist in drawing atttention to "Little Mo" when the market, which the Chancellor insists is sovereign in these matters, insists on using M3.
As we come to the end of the debate on the Finance Bill, the miners are on strike for the 19th week. There is a dockers' strike and an overspill of the miners' strike into the steel industry. Industrial action is about to be taken by teachers. There is a threat to the capital spending of local authorities. There is a change to the M3 indicator of money supply, which today has surpassed, even by the Chancellor's reckoning, the Government's annualised monetary targets. Interest rates have increased by 2 per cent.—that is taking two bites at the cherry, because last week interest rates increased by 1 per cent. Mortgage rates will increase, thereby causing increased inflation. That is what the Prime Minister described as an economy in good shape. If that is an economy in good shape, we are entitled to ask: what is an economy in bad shape?
We have sat through 150 hours of debate on the Finance Bill, through Report and Second Reading. We have seen the euphoria which greeted the Chancellor's Budget statement evaporate. As Mr. lain Macleod said, a Budget may begin with euphoria but that euphoria can and does disappear.
The Government should look at their policy and philosophy. They should look compassionately at the people and think of the unemployed and of the long-term future of our country when North sea oil begins to run out. They should consider all those factors and think again. If they do so, they will gain the congratulations not only of the Opposition but of the country as a whole.

Mr. Nigel Forman: On 12 July, following more than 150 hours of debate in Committee, I still believe that this year's Budget and Finance Bill were good. I especially like the fact that the legislation introduced the first instalment of a sensible three-year programme on corporate taxation. I also take it to be the first instalment of what I hope will be a four-year programme on personal taxation.
I shall devote a few brief remarks to the subject of personal taxation, because it involves the future course of the Government's economic policy. I should like the Government to bear very much in mind the fact that the strategy of moving to a broader tax base and lower rates of tax by tackling the problem of tax expenditures and achieving lower rates of taxation should take account of the need to ensure that the benefits of that approach are fulfilled at the same rate as costs are incurred.
Clearly, benefits will be obtained. The first instalment has already come in the shape of raised tax thresholds on

income tax, but we must see to it that the two other forms of benefit—lower rates of income tax and a gentler gradient of those rates through the income tax bracket—are steadily implemented during the four-year period. Otherwise, we shall discover that the Government have introduced the cost side of the reforming programme without giving sufficient parallel benefits. If we are to take radical steps in removing relief for life assurance premiums and pension contributions and in limiting mortgage relief to the standard rate, the benefits of that strategy must parallel its costs. If we do not manage to do that, we shall find ourselves in the difficulty to which Brian Walden referred in a recent newspaper article. He pointed out that the public would not easily understand or support a one-sided approach to an otherwise imaginative two-sided policy.
The same cautionary words apply to the extension of the tax base, to which my right hon. Friend referred in his opening speech. That might be worth doing in specific cases to ensure that revenue is buoyant, but it should not be done simply for the sake of doctrine—especially if it involves extending VAT to essential fresh food.
We all know that the pattern of spending of the poor, the pensioners and the unemployed includes a large element of spending on fresh food. It would not be supported in the country if we were to adopt that idea as an aspect of our policy.
I very much welcome the abolition of the national insurance surcharge. As I said at the outset of our discusions some months ago, it was a tax on jobs. I hope that we will extend that principle to the positive side; we should think of introducing sensible labour subsidies wherever possible, for example by reducing national insurance contributions for younger employees or giving further support to the job release scheme, the community programme and the enterprise allowance. I hope that my right hon. Friend will think seriously about all those possibilities between now and his next Budget.
If we are to stick to the approach that macroeconomic policy is designed to control inflation—and as I said earlier, I hope to see inflation eliminated and stable prices achieved—and if we rely on microeconomic policies to boost employment and improve the prospects for employment, it must not be only a matter of the Treasury passing the buck to other Departments in Whitehall but of the whole Government being seized of the need to introduce sensible microeconomic policies, whether in the sphere of public procurement, housing policy, education policy or portable pensions. A whole range of microeconomic policies need to be introduced during the four-year period ahead.
We have a reasonable chance of offering not simply hope to the millions of British people who are now languishing in unemployment but a real prospect that they will join the ranks of those in work whose personal disposable income has increased by such a substantial margin in recent times.
I welcome the Budget. I am relieved that the Finance Bill is shortly to obtain its Third Reading. I wish my right hon. Friends well.

Mr. Richard Wainwright: In March, the Chancellor was buoyant, sparkling and playing up fully to the captive Conservative media. Today, he wore the air of a Minister administering a Government in


decline. He also had the rather ashamed air of someone caught out in a double folly. As the House knows, the Chancellor has arranged that in this fiscal year virtually the whole of the Government's borrowing will take place in the first six months. What an extraordinary feat to destroy the Government's credit at the very time when they have decided to do their borrowing. Not only the Chancellor but the Government will pay dearly for that double folly.
Earlier in our debates, there was an interesting dialogue about the extraordinary, perhaps inadvertent, success of the United States economic administration. The Chancellor, not for the first time, attributed almost the whole of that success to what he described as the American people being willing to price themselves into employment. I wish briefly to point out the obvious—in order to price oneself into employment, employment must be available. That is certainly not the case in Britain because the Government refuse to run a counter-cyclical deficit of the proper size.
With regard to this business of people pricing themselves into employment, I take the example that is all too painful at the moment—the state of drought and restrictions on the use of water. The Chancellor says that people should price themselves into jobs, but were they to queue up outside the water authorities and say, "All we want is a pick and shovel and a subsistence wage," and to ask to be set on the repair of mains from which about one third of the nation's water is leaking owing to previous neglect, the water authorities could not take them on. There is no way in which large numbers of the unemployed can price themselves into employment in a country that is so badly administered that the employment opportunities are simply not there.
Reference has also been made to the Chancellor's remarkable Mais lecture, when he was still in confident mood and before he was so greatly deflated. He seemed to believe then that he was on his way to canonisation or possibly even divine status. He spoke of himself as:
fighting, and changing, the culture and psychology of two generations.
On the right hon. Gentleman's own suggestion, we have a second John Wesley, or, perhaps more accurately, a second Northcliffe on the Treasury Bench. However, it has all turned to ashes in this miserable and extremely lengthy Finance Bill.
All the excitement that was generated on Budget day by the rejigging of corporation tax has largely turned to ashes. As company accountants, finance directors and bank managers did their sums, they realised that manufacturing industry will have additional burdens under the new corporation tax regime.
Substantial distortions have been introduced in the Bill. On Budget day the Chancellor spoke of being a crusader against distortions in the tax system, but the way in which he is altering capital allowances produces some of the greatest distortions of all time. I shall quote a random example from today's edition of the Yorkshire Post, in which the correspondent on industry writes:
Changes in the tax laws relating to industrial buildings are due to come into effect next spring … The difference in tax saving to a company considering the merits of moving into larger premises, dabbling in the rental market or simply wanting to get off the ground will be so large that it is essential to make the decision now before time runs out.
A great army of industrialists will be converging on a relatively small number of competent architects, expecting that at the end of the day they will all get well planned

buildings. A Gadarene rush has been precipitated by the structure of the Finance Bill. In future, industry will pay dearly for the distortion that has been introduced, rushing industry into capital expenditure.
Part of the trouble is that there is no one in the Cabinet with real industrial experience to tell the Chancellor to come off it, and to point out to him the negative effects of destabilising corporation tax in this dramatic but unproductive manner. I commend the work of the Institute for Fiscal Studies, which assumed a realistic rate of inflation over the next few years and showed that most manufacturing sectors will be more heavily taxed.
I refer to the personal side of taxation and benefits. The Finance Bill, like the Budget, ignores the needs of the poor, those with large families, those who have been unemployed for more than 12 months and school-leavers who are without benefits. The Government's motto seems to be that as they are creating misery, they will lose fewest votes by concentrating all the misery on certain sections of the population rather than sharing the burden throughout the country. The Finance Bill is grossly unfair in the way in which it concentrates the burdens on those least able to bear them. All that may be good psephology, but it is poor patriotism. My right hon. and hon. Friends and I will vote against the Bill.

Mr. Mark Fisher: The policies of the Government and, in the past year, of the Chancellor have brought our industrial economy to its knees. The country is now racked by unemployment, industrial underinvestment, spare capacity, disastrous loss of skills, record numbers of bankruptcies, huge deficits in manufactures and the self-destructive cuts in public investment and public expenditure, all of which contribute to a constant widening of the gap between those like us who are lucky enough to have and those in our society who have not. It is the people of this country who are suffering as a result of the Government's policies.
Even after the last disastrous fiasco of a week, the Chancellor today showed no flicker of self-doubt, no glimmer of self-criticism. In his view, everything was fine. It was fine for the Government to have no view on the exchange rate or on interest rates and to allow investment to be determined solely by market forces. In effect, it was fine for the Government to disown their responsibility for the economy and industry of this country. The right hon. Gentleman's speech was wholly unworthy of his high office and utterly unconvincing. Instead of an analysis of what was wrong and a coherent programme to show what the Government intended to do to put it right, we sat through what was no more than a loud—mouthed, braggart Back Bench performance, slagging off the miners and the Opposition but doing nothing constructive about the problems facing the Chancellor.
The right hon. Gentleman's Budget speech, admittedly, was different. At that time he tried to court popularity to establish his personal reputation. He claimed then, as he claimed today, that the Budget was a radical reform Budget. As the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) has said, no one would deny that it was a well-performed and vigorous Budget speech and the Chancellor's right hon. and hon. Friends cheered when he finished. In Committee, however, under the longest scrutiny of any Finance Bill, the right hon. Gentleman's proposals crumbled to nothing. The claims of reform


proved to be largely a shuffling of cards. Moreover, to our surprise and disgust, such redistribution as there was tended to be from those who did not have advantages in society to those who did.
The Chancellor was right to recognise the need for reform of both corporate and personal taxation. We believe that such reform is necessary to create a vigorous industrial sector and a more just society, but the right hon. Gentleman's proposals failed to address the problems and indeed had the opposite effect. The right hon. Gentleman raised personal taxation thresholds, but he knew that this would not deal with the poverty trap. For the first time ever, he refused to include child benefit. When it was finally increased in May, the increase was far too small. It should have been 95p. He acknowledged that it was a difficult problem, but he chose the least effective, the least targeted and the least efficient route to a solution. Changes in child benefit would have been the right way at least to try to give a fair deal to the deprived in our society. By raising thresholds, the right hon. Gentleman wasted millions of pounds of taxpayers' money.
The right hon. Gentleman was quite right to hold that corporation tax with all its allowances and exemptions had become a fiasco. It now accounts for only 2·7 per cent. of tax revenue and it is complex and ineffective. Reform would have been welcome, but the Chancellor bungled it. The transition period will have the opposite effect to that which he intended. It will create tax artificialities, which he sought to eradicate. The ending of capital allowances will be a positive disincentive to investment, especially in manufacturing industry. When investment has already fallen by 42 per cent. in the past four years, that is a disaster.
As the hon. Member for Carshalton and Wallington (Mr. Forman) said, the Chancellor's real target should have been tax expenditures, but with the exception of life assurance relief the right hon. Gentleman has failed to do that and I very much doubt whether he will have the courage to grasp that nettle in the future despite his hon. Friend's comments. The Budget postured and promised a great deal, but it has only tinkered with the economy. This country remains just as economically unjust on a personal level and just as much in industrial decline. The Budget failed the unemployed, it failed the young people leaving school this year and searching for jobs, it failed the deprived, it certainly failed industry and, in so doing, it failed the country.
The Chancellor's failure in his Finance Bill and Budget are trivial compared with the failures in the real economy which were taking place while the Bill was in Committee. Broad money—M3—was rising rapidly, and the real marginal rate of interest rose to a historic and disastrous high of 7 per cent. The fact that the economy will be a black hole when North sea oil runs out is ignored.
It was clear from the Chancellor's failure to rise to the occasion this afternoon that he does not have the first idea what to do. It was a hack speech. Chunks of it, indeed, were taken almost word for word from the Mais speech. The Chancellor had nothing new to say. He had no response to make to the events of the past week. He repeated words that he had already circulated in a public press release.
Today the Chancellor was glib. He could not—or would not—rise to the occasion. The people and

industry of this country will suffer as a result of his failure to do so. The Finance Bill and the Chancellor have failed the country miserably. The Opposition condemn the Finance Bill.

Mr. Jeff Rooker: Unfashionably, I propose to talk a little bit about the Bill. The other day I advised my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) that on Third Reading he could not talk about what is not in the Bill—he could talk only about what is in it. It appears that there has been a change of which I was not aware, and that I was wrong. I have learned a lesson for another day.
Our proceedings end as they have progressed—without The Guardian being present. I hope that we shall hear no more complaints from that august newspaper about our efforts in this Chamber to scrutinise finance legislation.
I shall not refer in detail to the scrutiny by the Committee. It showed the fraudulent nature of the image which the Chancellor presented when he presented his Budget. I shall give two small but important examples. First, when the Chancellor raised the tobacco tax, he gave the distinct impression that he was doing something for the health of the nation. There were headlines about it. However, it was made abundantly clear in Committee that there was not a shred of evidence to support that claim. Secondly, the Chancellor grossly misled hundreds of thousands of people who are disabled and who drive motor vehicles. We spent many hours in Committee trying to put right the misleading impression in the Chancellor's Budget speech. That was done by means of the analysis of the clauses and the transmission of long letters from Ministers to members of the Committee.
The tax burden is now heavier. It does not matter how Ministers try to juggle the figures; in real terms, the tax burden is £22·5 billion greater this year than it was in the final year of the Labour Government. That is the Government's figure, and it can be found in the Official Report.
The tax burden is heavier for the married couple with average earnings. They would have required an income tax reduction of 3·7p in the pound, after the measures in the Finance Bill came into effect, to restore their income tax payment to the same proportion of their earnings as it occupied in the final year of the Labour Government.
Had we had an opportunity to debate amendment No. 10—to reduce the basic rate by a penny in the pound—we would have made that case in greater detail. Even with the 12·5 per cent. increase in the threshold, the income tax burden has increased for a family on average earnings by 3·7p in the pound.
No hon. Member could deny that the Bill contains an attack on charities. Between the hours of 8 and 10 this morning, we heard a sustained critique—from hon. Members on both sides of the Chamber—of changes to VAT on building work, as they affect charities. We hope that that will be corrected, but we shall have to wait either for the third Finance Bill this year or for next year's Finance Bill.
The Bill provides massive tax handouts for the well-off. The Chief Secretary approves of that because his starting point is different from mine. However, if we add the changes in capital transfer tax, capital gains tax, development land tax, investment income surcharge and


income tax, it is possible to find £1 billion that has been given to the well-off. The Chancellor had the brass neck to tell us that he was doing a good turn by the pensioners when he abolished investment income surcharge. He forgot to tell us that a person needs about £80,000—though not necessarily in the bank—before he pays that surcharge. The Chancellor could not bring himself to admit on Budget day that that was the sort of pensioner he was speaking of.
The hon. Member for Carshalton and Wallington (Mr. Forman) warned us about future changes in VAT. We have still not been told why the clear, commitment in the Conservatives' 1979 manifesto not to impose VAT on food, fuel, housing and transport was not repeated in the 1983 manifesto. We are entitled to know the status of that clear 1979 commitment. The Chancellor is on record as saying, shortly after the Budget in a radio interview that was reported in the financial press, that he does not feel bound by the 1979 commitment because it was not repeated in 1983. We do not know whether there is to be a distinction between fresh food and inessential fresh food. Nevertheless, the Government will widen the VAT base next year.
I should like to make as strong a plea as I can to Treasury Ministers, if any of them are still at the Treasury next year. When he moved the Second Reading—the day that the Government passed a closure motion on the debate for the first time in 60 years—the Chief Secretary said that the Budget was a reforming one in respect of corporation taxes. We are warned that we might get a reforming budget next year in respect of personal taxation. Today, there has been published the latest report of the Institute of Fiscal Studies on the reform of the social security system. I know that the institute has held private seminars for civil servants, Ministers and Back Bench Conservatives. Some of my hon. Friends have also participated. Before there is any substantial messing around with the income tax or the social security system, the aims that are implicit in that report should be examined in detail by the Government.
I am not suggesting that the Opposition rubber stamp those proposals but we welcome the report because the national insurance system is a fraud and does not work as intended. The income tax system could be acceptable. It is widely accepted because of its security, confidentiality and inherent fairness. Nobody regards it as a means test although, by definition, it has to be one. It contains a proposal that would enable us to get to those whom we represent the money that we vote them in the House. The present interaction of the tax and social security systems does not fulfil that function, and it should be examined before the Government start looking at one part in isolation, with an eye on next year's Finance Bill.
The Opposition do not like the Bill and will vote against it. Anyone who is listening to our proceedings should be aware that it is not worth the £9·75 that is printed on the cover. Do not buy it—it is a bad buy. We are the Labour party and we fight bad Tory Bills.

The Chief Secretary to the Treasury (Mr. Peter Rees): It is three months and two days since we had the Second Reading of the Bill. In a sense—speaking for myself and perhaps for some of my hon. Friends and some Labour Members—I have lived with this Bill.

Dr. Oonagh McDonald: What about the hon. Ladies?

Mr. Rees: I beg the hon. Lady's pardon.
I never develop an affection for any legislation, but this one has become part of our life. I have encountered many Finance Bills, and I do not think that the House would welcome it if I went back over their history. It is remarkable how the theme and structure of the Bill—[Interruption.] Hon. Members should give me a chance. I have been on my feet for only a few seconds.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and my right hon. Friend the Chancellor have tried to set the Bill in its economic context, and that has been helpful for the debate. The right hon. Member for Sparkbrook obviously wanted the Bill to go out 'with a bang and not a whimper, but I do not know whether he has succeeded. He does not have a particularly good track record as a Cassandra. After all, he forecast a doubling of inflation by the end of 1983, and mercifully we are still waiting for that.
The right hon. Member for Sparkbrook made an interesting speech which perhaps at times was a little cavalier with the facts. As my right hon. Friend the Chancellor said, it is undeniable that the rise in interest rates is an unattractive phenomenon. How long it will last remains to be seen, and it is impossible to forecast the consequences. However, this rise is supportable if, as we confidently assert, the economy is sound and the lines of the Government's economic strategy are firm. As a country, we shall be well capable of surviving the fevers of a feverish July. I shall remind the House of some of the factors that lead me to make that prediction. After all, we have a combination of 3 per cent. growth and 5 per cent. inflation, which is the lowest since the 1960s.
The gross domestic product is at the highest ever level. GDP growth is the highest in the European Community in 1983, and the OECD forecasts that this year our growth will be among the highest in the Community. That growth is broadly and soundly based. Business investment is up 8 per cent. in the six months to March, compared to the previous six months. Non-oil export volume is up 9 per cent. over the past year. About 200,000 new jobs were created between March and December last year.
To me, those facts do not show an economy on the point of collapse. I know that the right hon. Member for Sparkbrook, having spent his formative years in Government at a time when an annual crisis was a regular political and economic phenomenon, tends to view our performance through slightly distorted lenses. Those are the facts, and they are the reasons why we assert with confidence that the recent interest rate increase is not heralding, as the right hon. Gentleman forecast, the collapse of our economy or our economic strategy.
Nor do I detect any reasonable alternative. The right hon. Gentleman, in one of the bursts of candour that are one of the more endearing features of his Ruskin lectures, emphasised that in the country as a whole there is doubt about the Labour party's apparent inability to offer a convincing alternative counter-inflation policy. He sketched lightly the possibility of a prices-incomes policy that would have sat a little uneasily with his loudly proclaimed loyalty to the Labour party and trade union institutions. I shall leave him, on some other occasion. to reconcile those strands in his thinking.
If politics is about choice, the Labour party in the 12 months since the last general election has offered the country precious little choice. This was evident in its approach to the Finance Bill. I do not know what we are to make of the Labour party's priorities when we spend four hours debating the fiscal implication of subsidies to employers who provide nurseries for employees. That may be a laudable objective, but to spend four hours on it when so many other aspects of the Bill could have been examined shows a curious set of priorities. What, too, are we to make of amendment No. 10? The right hon. Member for Sparkbrook did not refer to it, but it was dealt with by his hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). I agree that the hon. Gentleman did not have political reasons for deciding not to move the amendment. It was done in deference to the time already taken up by other amendments. The principle underlying that amendment—a cut of 1p in the basic rate of income tax—was extraordinary.
If the hon. Gentleman is joining the Conservative party in our move towards a better balance in the tax structure, I welcome him as our newest recruit. That would be a massive conversion beside which the conversion of St. Paul would pale into insignificance.

Mr. Rooker: Perhaps I did not make clear in my brief remarks that we tabled the amendment to give the House the first opportunity in more than 150 hours to debate personal taxation. That was not discussed on the Floor of the House, nor could it be discussed in Committee.
We could not table an amendment to chop 3·7p in the pound from income tax, to reduce it to its level when Labour was in power, because we could not table the necessary amendments to find the extra money. We could have tabled an amendment for a token penny, as I made clear in my reference to the £1 billion tax handout to the well-off.

Mr. Rees: I am touched by the hon. Gentleman's fidelity to the rules of order and relevance. They were not very apparent to me or to my right hon. and hon. Friends when we were discussing the Bill in Committee Room 10. [Interruption.] The House and the country can judge my contribution from Hansard rather than from prejudiced sedentary interventions of the hon. Member for Birmingham, Hodge Hill (Mr. Davis).
I should like to speculate on how that cut, which would have cost £950 million this year and more than £1 billion in a full financial year, would have been financed. Who was it designed to benefit? We have been reminded ad nauseam about our tax reliefs by the right hon. Member for Sparkbrook and by his hon. Friends. They were referred to as handouts. I was reproved the other day for describing non-contributory social security benefits as handouts. Evidently it is a sensitive use of the phrase to describe tax reliefs as handouts. Perhaps we shall iron out that fine semantic point on another occasion.
How are we to evaluate the proposals of a party that would have given 30p a week to a person on half average earnings, £1·20 per week to a person on average earnings and £3 a week to a person with twice average earnings, or more? What sort of priorities can we extract from an amendment in those terms? When the right hon. Gentleman moved from his general economic theme to the details of the Bill, he had to scrape the barrel to describe

the extension of VAT to take-away foods and home improvement grants as discrimination against the least well-off in our society. His evaluation was, I am afraid, as faulty as ever.
The hon. Member for Middlesbrough (Mr. Bell) persists in seeing public expenditure cuts in our policies. Perhaps he has not read the previous public expenditure White Paper or, indeed, our announcement last week that we are holding public expenditure broadly stable. That is not to say that some programmes will not be increased—for example, in the National Health Service. That means that there must be corresponding economies in other programmes.
To reassure the hon. Gentleman on one point, I am pleased to be able to tell the House that, following the agreement reached at the Fontainebleau summit, the European Parliament budget committee has today voted the release of our 1983 budget refund of £440 million net from the reserve chapter of the 1984 budget. I am sure that that news will warm the hearts of hon. Members on both sides of the House. Hon. Members will find a basic identity of view there.
I hoped that we would hear at least the contribution of an elder statesman from the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), but his contribution today was in marked contrast to that which he made in the Budget debate. I am unaware of what caused him radically to reassess his view. The structure of our policies is the same, and the Bill faithfully translates into law, or will do when it receives its Third Reading, the broad budgetary themes outlined by my right hon. Friend the Chancellor of the Exchequer. Perhaps it was because the right hon. Gentleman was surrounded by his erstwhile hon. Friends that just a touch of bitterness entered his benign and urbane character. That would make me sad.

Mr. Roy Jenkins: It may be that just a touch of disaster has entered the Government's management of the economy.

Mr. Rees: We respect the contribution that the hon. Gentleman made when he was Chancellor of the Exchequer and I am sorry that it did not receive in his party or in the country the appreciation that it perhaps deserved. I know that that is often the fate of Chancellors, but at least I can say that the massive contribution of my right hon. Friend the present Chancellor of the Exchequer is deeply and properly appreciated.
My hon. Friend the Member for Carshalton and Wallington (Mr. Forman) made an elegant and notable speech. He sat with admirable fortitude and self-restraint for many hours in Committee Room 10 and we deeply appreciated his speech today and wished that there had been more opportunities for such speeches.

Mr. Terry Davis: There were plenty of opportunities.

Mr. Rees: I wonder. If the hon. Member for Hodge Hill reflects on the record that the Opposition announced with such pride, he may not feel that the Opposition scrutinised the Bill with quite the care and constructive approach that I know he would like to characterise his every activity.
Labour Members did not concentrate sufficiently on the amendments made to the Bill. There was a concession on alterations to listed buildings and a concession on industrial life assurance policies caught in the pipeline on


Budget day. I know that that was a matter of particular anxiety to the hon. Member for Hodge Hill. The Government endeavoured to meet his worry, and I am sure that he will agree that we did so in full measure.
Major help was provided for proprietors of furnished holiday lettings and for caravan site proprietors. There was the VAT improvement on aids for the disabled and we made further improvements to the share option scheme which I am sorry did not command the universal support of the Committee or the House. I believe that those improvements carried that imaginative concept a stage further.
Following wide consultations, improvements were made to the provisions on offshore funds and the control of foreign companies. The revision of capital allowances will be of great benefit to the shipping and film industries, among others.
There were also the amendments to the herd basis. My hon. Friend the Member for Banbury (Mr. Baldry) made a perceptive contribution on that matter, and details of the outgoers scheme will be announced soon by my right hon. Friend the Minister of Agriculture. Those who take advantage of the scheme will be able to take their receipts as capital receipts, because they are giving up part or whole of their business, in which case they will, admittedly, be subject to capital gains tax; but I hope that the threshold of over £5,000 will go a long way to mitigate the tax bill. Alternatively, the scheme will probably be able to be structured in such a way that payments can be taken as trading receipts and offset against accumulated losses. That provision will be made specifically in deference to the representations made to us.
The examination of the Bill was a long one. The hon. Member for Perry Barr complained, as he was entitled to do, that the Second Reading debate was closured. It gives me no pleasure to recall that the closure came after three Labour Members had made speeches aggregating four and a half hours. I leave them and those who study our debates in Hansard to judge whether the points that they made justified such long speeches. I am not absolutely certain whether we use our time entirely rationally. Sometimes there is an element of irrationality. [Interruption.] We should leave that to those outside. I am happy to stand by its judgment. [Interruption.] The hon. Member for Great Grimsby (Mr. Mitchell) is adept at making contributions from sitting and standing positions.

Mr. Austin Mitchell: The House prefers it when I am seated.

Mr. Rees: I join company with the hon. Gentleman on that.
I commend the Bill to the House. It is a good and improved Bill. It will benefit individuals, companies and the economy. It forms part of a consistent tax strategy and will be worked out against a firm economic and fiscal framework, which involves a firm control of public expenditure. The Bill is consistent with our economic strategy, which is both sound and seen to be sound. I ask my right hon. and hon. Friends to support the Bill.

Question put, That the Bill be read the Third time:—

The House divided: Ayes, 331 Noes, 168.

Division No. 408]
[7.51


AYES


Adley, Robert
Alexander, Richard


Aitken, Jonathan
Amery, Rt Hon Julian





Ancram, Michael
Forth, Eric


Arnold, Tom
Fowler, Rt Hon Norman


Ashby, David
Fox, Marcus


Aspinwall, Jack
Franks, Cecil


Atkins, Rt Hon Sir H.
Freeman, Roger


Atkins, Robert (South Ribble)
Fry, Peter


Baker, Nicholas (N Dorset)
Gale, Roger


Baldry, Anthony
Galley, Roy


Banks, Robert (Harrogate)
Gardiner, George (Reigate)


Batiste, Spencer
Gardner, Sir Edward (Fylde)


Bellingham, Henry
Garel-Jones, Tristan


Bendall, Vivian
Gilmour, Rt Hon Sir Ian


Benyon, William
Glyn, Dr Alan


Best, Keith
Goodlad, Alastair


Bevan, David Gilroy
Gorst, John


Biffen, Rt Hon John
Gow, Ian


Biggs-Davison, Sir John
Gower, Sir Raymond


Blaker, Rt Hon Sir Peter
Grant, Sir Anthony


Body, Richard
Greenway, Harry


Bonsor, Sir Nicholas
Gregory, Conal


Bottomley, Peter
Griffiths, E. (B'y St Edm'ds)


Bottomley, Mrs Virginia
Griffiths, Peter (Portsm'th N)


Bowden, A. (Brighton K'to'n)
Grist, Ian


Bowden, Gerald (Dulwich)
Ground, Patrick


Boyson, Dr Rhodes
Grylls, Michael


Brandon-Bravo, Martin
Gummer, John Selwyn


Bright, Graham
Hamilton, Hon A. (Epsom)


Brinton, Tim
Hamilton, Neil (Tatton)


Brittan, Rt Hon Leon
Hannam, John


Brown, M. (Brigg &amp; Cl'thpes)
Hargreaves, Kenneth


Browne, John
Harris, David


Bruinvels, Peter
Harvey, Robert


Bryan, Sir Paul
Haselhurst, Alan


Buck, Sir Antony
Havers, Rt Hon Sir Michael


Budgen, Nick
Hawkins, C. (High Peak)


Bulmer, Esmond
Hawkins, Sir Paul (SW N'folk)


Burt, Alistair
Hawksley, Warren


Butcher, John
Hayes, J.


Butler, Hon Adam
Hayhoe, Barney


Butterfill, John
Hayward, Robert


Carlisle, John (N Luton)
Heath, Rt Hon Edward


Carlisle, Rt Hon M. (W'ton S)
Heathcoat-Amory, David


Cash, William
Heddle, John


Chapman, Sydney
Henderson, Barry


Churchill, W. S.
Hickmet, Richard


Clark, Hon A. (Plym'th S'n)
Higgins, Rt Hon Terence L


Clark, Dr Michael (Rochford)
Hind, Kenneth


Clark, Sir W. (Croydon S)
Hirst, Michael


Clegg, Sir Walter
Hogg, Hon Douglas (Gr'th'm)


Colvin, Michael
Holland, Sir Philip (Gedling)


Conway, Derek
Holt, Richard


Coombs, Simon
Howard, Michael


Cope, John
Howarth, Alan (Stratf'd-on-A)


Corrie, John
Howe, Rt Hon Sir Geoffrey


Couchman, James
Howell, Rt Hon D. (G'ldford)


Cranborne, Viscount
Howell, Ralph (N Norfolk)


Critchley, Julian
Hubbard-Miles, Peter


Crouch, David
Hunt, David (Wirral)


Currie, Mrs Edwina
Hunter, Andrew


Dickens, Geoffrey
Hurd, Rt Hon Douglas


Dicks, Terry
Irving, Charles


Dorrell, Stephen
Jackson, Robert


Douglas-Hamilton, Lord J.
Jenkin, Rt Hon Patrick


Dover, Den
Jessel, Toby


du Cann, Rt Hon Edward
Johnson Smith, Sir Geoffrey


Durant, Tony
Jones, Robert (W Herts)


Dykes, Hugh
Kellett-Bowman, Mrs Elaine


Edwards, Rt Hon N. (P'broke)
Kershaw, Sir Anthony


Eggar, Tim
Key, Robert


Emery, Sir Peter
King, Roger (B'ham N'field)


Eyre, Sir Reginald
King, Rt Hon Tom


Fairbairn, Nicholas
Knight, Gregory (Derby N)


Fallon, Michael
Knight, Mrs Jill (Edgbaston)


Farr, Sir John
Knowles, Michael


Favell, Anthony
Knox, David


Fenner, Mrs Peggy
Lamont, Norman


Finsberg, Sir Geoffrey
Lang, Ian


Fletcher, Alexander
Latham, Michael


Forman, Nigel
Lawler, Geoffrey


Forsyth, Michael (Stirling)
Lawrence, Ivan






Lawson, Rt Hon Nigel
Rees, Rt Hon Peter (Dover)


Lee, John (Pendle)
Renton, Tim


Leigh, Edward (Gainsbor'gh)
Ridley, Rt Hon Nicholas


Lennox-Boyd, Hon Mark
Ridsdale, Sir Julian


Lester, Jim
Rifkind, Malcolm


Lewis, Sir Kenneth (Stamf'd)
Roberts, Wyn (Conwy)


Lightbown, David
Robinson, Mark (N'port W)


Lilley, Peter
Roe, Mrs Marion


Lloyd, Ian (Havant)
Rossi, Sir Hugh


Lloyd, Peter, (Fareham)
Rost, Peter


Lord, Michael
Rumbold, Mrs Angela


McCurley, Mrs Anna
Ryder, Richard


Macfarlane, Neil
Sackville, Hon Thomas


MacKay, Andrew (Berkshire)
Sainsbury, Hon Timothy


MacKay, John (Argyll &amp; Bute)
St. John-Stevas, Rt Hon N.


Maclean, David John
Sayeed, Jonathan


McNair-Wilson, P. (New F'st)
Scott, Nicholas


McQuarrie, Albert
Shaw, Giles (Pudsey)


Madel, David
Shepherd, Colin (Hereford)


Major, John
Shepherd, Richard (Aldridge)


Malins, Humfrey
Shersby, Michael


Malone, Gerald
Silvester, Fred


Maples, John
Sims, Roger


Marland, Paul
Skeet, T. H. H.


Marlow, Antony
Smith, Sir Dudley (Warwick)


Marshall, Michael (Arundel)
Smith, Tim (Beaconsfield)


Mates, Michael
Soames, Hon Nicholas


Maude, Hon Francis
Speller, Tony


Mawhinney, Dr Brian
Spencer, Derek


Maxwell-Hyslop, Robin
Spicer, Jim (W Dorset)


Mayhew, Sir Patrick
Spicer, Michael (S Worcs)


Mellor, David
Squire, Robin


Merchant, Piers
Stanbrook, Ivor


Meyer, Sir Anthony
Stanley, John


Miller, Hal (B'grove)
Steen, Anthony


Mills, Iain (Meriden)
Stern, Michael


Mills, Sir Peter (West Devon)
Stevens, Lewis (Nuneaton)


Miscampbell, Norman
Stewart, Allan (Eastwood)


Mitchell, David (NW Hants)
Stewart, Andrew (Sherwood


Moate, Roger
Stewart, Ian (N Hertf'dshire)


Monro, Sir Hector
Stokes, John


Montgomery, Fergus
Stradling Thomas, J.


Moore, John
Sumberg, David


Morris, M. (N'hampton, S)
Tapsell, Peter


Morrison, Hon C. (Devizes)
Taylor, John (Solihull)


Morrison, Hon P. (Chester)
Taylor, Teddy (S'end E)


Moynihan, Hon C.
Tebbit, Rt Hon Norman


Mudd, David
Temple-Morris, Peter


Murphy, Christopher
Terlezki, Stefan


Neale, Gerrard
Thatcher, Rt Hon Mrs M.


Needham, Richard
Thomas, Rt Hon Peter


Nelson, Anthony
Thompson, Donald (Calder V)


Neubert, Michael
Thompson, Patrick (N'ich N)


Newton, Tony
Thorne, Neil (Ilford S)


Nicholls, Patrick
Thurnham, Peter


Normanton, Tom
Townend, John (Bridlington)


Norris, Steven
Townsend, Cyril D. (B'heath)


Onslow, Cranley
Trippier, David


Oppenheim, Philip
Trotter, Neville


Ottaway, Richard
Twinn, Dr Ian


Page, Sir John (Harrow W)
Vaughan, Sir Gerard


Page, Richard (Herts SW)
Viggers, Peter


Parkinson, Rt Hon Cecil
Waddington, David


Parris, Matthew
Wakeham, Rt Hon John


Patten, Christopher (Bath)
Waldegrave, Hon William


Patten, John (Oxford)
Walden, George


Pattie, Geoffrey
Walker, Bill (T'side N)


Pawsey, James
Wall, Sir Patrick


Peacock, Mrs Elizabeth
Waller, Gary


Pollock, Alexander
Walters, Dennis


Powell, Rt Hon J. E. (S Down)
Ward, John


Powell, William (Corby)
Wardle, C. (Bexhill)


Powley, John
Warren, Kenneth


Prentice, Rt Hon Reg
Watson, John


Price, Sir David
Watts, John


Prior, Rt Hon James
Wells, Bowen (Hertford)


Proctor, K. Harvey
Wheeler, John


Raffan, Keith
Whitfield, John


Raison, Rt Hon Timothy
Whitney, Raymond


Rathbone, Tim
Wiggin, Jerry





Winterton, Mrs Ann
Young, Sir George (Acton)


Winterton, Nicholas



Wolfson, Mark
Tellers for the Ayes:


Wood, Timothy
Mr. Carol Mather and Mr. Robert Boscawen.


Woodcock, Michael



Yeo, Tim





NOES


Adams, Allen (Paisley N)
Hart, Rt Hon Dame Judith


Alton, David
Hattersley, Rt Hon Roy


Anderson, Donald
Haynes, Frank


Archer, Rt Hon Peter
Hogg, N. (C'nauld &amp; Kilsyth)


Ashdown, Paddy
Holland, Stuart (Vauxhall)


Atkinson, N. (Tottenham)
Home Robertson, John


Bagier, Gordon A. T.
Howells, Geraint


Banks, Tony (Newham NW)
Hughes, Dr. Mark (Durham)


Barnett, Guy
Hughes, Robert (Aberdeen N)


Beckett, Mrs Margaret
Hughes, Roy (Newport East)


Bell, Stuart
Hughes, Sean (Knowsley S)


Bennett, A. (Dent'n &amp; Red'sh)
Hughes, Simon (Southwark)


Bermingham, Gerald
Janner, Hon Greville


Bidwell, Sydney
Jenkins, Rt Hon Roy (Hillh'd)


Blair, Anthony
John, Brynmor


Boothroyd, Miss Betty
Jones, Barry (Alyn &amp; Deeside)


Boyes, Roland
Kilroy-Silk, Robert


Brown, Hugh D. (Provan)
Kinnock, Rt Hon Neil


Brown, N. (N'c'tle-u-Tyne E)
Kirkwood, Archy


Brown, R. (N'c'tle-u-Tyne N)
Lambie, David


Brown, Ron (E'burgh, Leith)
Leighton, Ronald


Bruce, Malcolm
Lewis, Ron (Carlisle)


Buchan, Norman
Lewis, Terence (Worsley)


Caborn, Richard
Lloyd, Tony (Stretford)


Callaghan, Jim (Heyw'd &amp; M)
Lofthouse, Geoffrey


Campbell-Savours, Dale
McDonald, Dr Oonagh


Carter-Jones, Lewis
McKelvey, William


Cartwright, John
Mackenzie, Rt Hon Gregor


Clarke, Thomas
McWilliam, John


Clay, Robert
Marek, Dr John


Clwyd, Mrs Ann
Marshall, David (Shettleston)


Cocks, Rt Hon M. (Bristol S.)
Martin, Michael


Coleman, Donald
Mason, Rt Hon Roy


Conlan, Bernard
Maxton, John


Cook, Robin F. (Livingston)
Meacher, Michael


Cowans, Harry
Meadowcroft, Michael


Cox, Thomas (Tooting)
Michie, William


Craigen, J. M.
Mikardo, Ian


Crowther, Stan
Millan, Rt Hon Bruce


Davies, Rt Hon Denzil (L'lli)
Miller, Dr M. S. (E Kilbride)


Davies, Ronald (Caerphilly)
Morris, Rt Hon A. (W'shawe)


Davis, Terry (B'ham, H'ge H'l)
Morris, Rt Hon J. (Aberavon)


Deakins, Eric
Nellist, David


Dewar, Donald
Oakes, Rt Hon Gordon


Dixon, Donald
O'Brien, William


Dobson, Frank
O'Neill, Martin


Dormand, Jack
Orme, Rt Hon Stanley


Dubs, Alfred
Owen, Rt Hon Dr David


Duffy, A. E. P.
Park, George


Dunwoody, Hon Mrs G.
Parry, Robert


Eastham, Ken
Patchett, Terry


Edwards, Bob (W'h'mpt'n SE)
Pavitt, Laurie


Evans, John (St. Helens N)
Pendry, Tom


Fatchett, Derek
Penhaligon, David


Faulds, Andrew
Pike, Peter


Fields, T. (L'pool Broad Gn)
Powell, Raymond (Ogmore)


Fisher, Mark
Prescott, John


Flannery, Martin
Redmond, M.


Foot, Rt Hon Michael
Rees, Rt Hon M. (Leeds S)


Foster, Derek
Richardson, Ms Jo


Foulkes, George
Roberts, Allan (Bootle)


Fraser, J. (Norwood)
Robertson, George


Freeson, Rt Hon Reginald
Rogers, Allan


George, Bruce
Rooker, J. W.


Gilbert, Rt Hon Dr John
Ross, Ernest (Dundee W)


Godman, Dr Norman
Sedgemore, Brian


Golding, John
Sheerman, Barry


Hamilton, James (M'well N)
Sheldon, Rt Hon R.


Hamilton, W. W. (Central Fife)
Shore, Rt Hon Peter


Hancock, Mr. Michael
Short, Ms Clare (Ladywood)


Hardy, Peter
Short, Mrs R.(W'hampt'n NE)


Harrison, Rt Hon Walter
Silkin, Rt Hon J.






Skinner, Dennis
Wardell, Gareth (Gower)


Smith, C.(Isl'ton S &amp; F'bury)
Wareing, Robert


Smith, Rt Hon J. (M'kl'ds E)
Weetch, Ken


Snape, Peter
Welsh, Michael


Soley, Clive
Wigley, Dafydd


Spearing, Nigel
Williams, Rt Hon A.


Stott, Roger
Winnick, David


Straw, Jack
Woodall, Alec


Thomas, Dafydd (Merioneth)
Wrigglesworth, Ian


Thorne, Stan (Preston)
Young, David (Bolton SE)


Tinn, James



Torney, Tom
Tellers for the Noes:


Wainwright, R.
Mr. Allen McKay and Mr. Austin Mitchell.


Wallace, James

Question accordingly agreed to.

Bill read the Third time, and passed.

Orders of the Day — CAPITAL TRANSFER TAX BILL [LORDS]

Read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Major.]

Committee tomorrow.

Orders of the Day — BUSINESS OF THE HOUSE

Motion made, and Question proposed,
That, at the next sitting of the House on which Motions are moved on behalf of the Committee of Selection, such Motions may be proceeded with, though opposed, for one and a half hours after the first Motion has been entered upon, and, if proceedings on the Motions have not been disposed of by that hour, any Amendments to the first Motion which may have been selected by Mr. Speaker may be moved, the Questions thereon shall be put forwith, and Mr. Speaker shall then put the Question upon the said Motion and any Questions necessary to dispose of the other Motions and of any Amendments moved thereto which have been selected by him; and that, notwithstanding the practice of the House, each Motion shall be regarded as a single Motion. —[Mr. Major.]

Question put:—

The House divided: Ayes 263, Noes 10.

Division No. 409]
 [8.06 pm


AYES


Adams, Allen (Paisley N)
Edwards, Rt Hon N. (P'broke)


Adley, Robert
Eggar, Tim


Alexander, Richard
Emery, Sir Peter


Amery, Rt Hon Julian
Eyre, Sir Reginald


Ancram, Michael
Fallon, Michael


Arnold, Tom
Farr, Sir John


Ashby, David
Favell, Anthony


Aspinwall, Jack
Fenner, Mrs Peggy


Atkins, Robert (South Ribble)
Fletcher, Alexander


Baker, Nicholas (N Dorset)
Forman, Nigel


Baldry, Anthony
Forsyth, Michael (Stirling)


Banks, Robert (Harrogate)
Forth, Eric


Batiste, Spencer
Fowler, Rt Hon Norman


Bendall, Vivian
Fox, Marcus


Benyon, William
Franks, Cecil


Best, Keith
Freeman, Roger


Biffen, Rt Hon John
Gale, Roger


Blaker, Rt Hon Sir Peter
Garel-Jones, Tristan


Body, Richard
Glyn, Dr Alan


Boothroyd, Miss Betty
Goodlad, Alastair


Bottomley, Peter
Gorst, John


Bowden, Gerald (Dulwich)
Gow, Ian


Boyson, Dr Rhodes
Gower, Sir Raymond


Brandon-Bravo, Martin
Grant, Sir Anthony


Bright, Graham
Greenway, Harry


Brinton, Tim
Gregory, Conal


Brown, N. (N'c'tle-u-Tyne E)
Griffiths, E. (B'y St Edm'ds)


Browne, John
Griffiths, Peter (Portsm'th N)


Bryan, Sir Paul
Grist, Ian


Buck, Sir Antony
Ground, Patrick


Bulmer, Esmond
Grylls, Michael


Butler, Hon Adam
Gummer, John Selwyn


Butterfill, John
Hamilton, Neil (Tatton)


Carlisle, John (N Luton)
Hargreaves, Kenneth


Carlisle, Kenneth (Lincoln)
Harris, David


Carlisle, Rt Hon M. (W'ton S)
Harvey, Robert


Cash, William
Haselhurst, Alan


Chapman, Sydney
Havers, Rt Hon Sir Michael


Clark, Hon A. (Plym'th S'n)
Hawkins, Sir Paul (SW N'folK)


Clark, Dr Michael (Rochford)
Hayes, J.


Clegg, Sir Walter
Hayhoe, Barney


Cocks, Rt Hon M. (Bristol S.)
Haynes, Frank


Coleman, Donald
Heathcoat-Amory, David


Conway, Derek
Heddle, John


Coombs, Simon
Henderson, Barry


Cope, John
Higgins, Rt Hon Terence L.


Corrie, John
Hind, Kenneth


Couchman, James
Hirst, Michael


Cranborne, Viscount
Hogg, N. (C'nauld &amp; Kilsyth)


Crouch, David
Holt, Richard


Crowther, Stan
Home Robertson, John


Currie, Mrs Edwina
Howard, Michael


Dorrell, Stephen
Howarth, Alan (Stratf'd-on-A)


Douglas-Hamilton, Lord J.
Howe, Rt Hon Sir Geoffrey


Dover, Den
Howell, Rt Hon D. (G'ldford)


du Cann, Rt Hon Edward
Howell, Ralph (N Norfolk)


Durant, Tony
Hughes, Dr. Mark (Durham)


Dykes, Hugh
Hunt, David (Wirral)


Eastham, Ken
Hurd, Rt Hon Douglas






Jackson, Robert
Mayhew, Sir Patrick


Jenkin, Rt Hon Patrick
Mellor, David


Jessel, Toby
Merchant, Piers


Johnson-Smith, Sir Geoffrey
Meyer, Sir Anthony


Jones, Robert (W Herts)
Miller, Hal (B'grove)


Key, Robert
Mitchell, David (NW Hants)


King, Roger (B'ham N'field)
Montgomery, Fergus


King, Rt Hon Tom
Moore, John


Knight, Gregory (Derby N)
Morris, Rt Hon A. (W'shawe)


Knowles, Michael
Morris, M. (N'hampton, S)


Knox, David
Morrison, Hon P. (Chester)


Lamond, James
Moynihan, Hon C.


Lamont, Norman
Murphy, Christopher


Lang, Ian
Needham, Richard


Latham, Michael
Nelson, Anthony


Lawler, Geoffrey
Neubert, Michael


Lawson, Rt Hon Nigel
Newton, Tony


Lee, John (Pendle)
Nicholls, Patrick


Leigh, Edward (Gainsbor'gh)
Norris, Steven


Lennox-Boyd, Hon Mark
Oppenheim, Philip


Lester, Jim
Ottaway, Richard


Lightbown, David
Page, Sir John (Harrow W)


Lilley, Peter
Page, Richard (Herts SW)


Lloyd, Ian (Havant)
Parkinson, Rt Hon Cecil


Lloyd, Peter, (Fareham)
Parris, Matthew


Lord, Michael
Patten, Christopher (Bath)


McCurley, Mrs Anna
Patten, John (Oxford)


Macfarlane, Neil
Pattie, Geoffrey


McKay, Allen (Penistone)
Pawsey, James


MacKay, Andrew (Berkshire)
Peacock, Mrs Elizabeth


MacKay, John (Argyll &amp; Bute)
Pollock, Alexander


Maclean, David John
Powley, John


McQuarrie, Albert
Prentice, Rt Hon Reg


McWilliam, John
Price, Sir David


Major, John
Proctor, K. Harvey


Malins, Humfrey
Raffan, Keith


Malone, Gerald
Rathbone, Tim


Marland, Paul
Rhys Williams, Sir Brandon


Marlow, Antony
Ridley, Rt Hon Nicholas


Marshall, Michael (Arundel)
Rifkind, Malcolm


Mason, Rt Hon Roy
Roberts, Wyn (Conwy)


Mates, Michael
Robinson, Mark (N'port W)


Maude, Hon Francis
Rossi, Sir Hugh


Mawhinney, Dr Brian
Rowe, Andrew





Rowlands, Ted
Thatcher, Rt Hon Mrs M.


Rumbold, Mrs Angela
Thompson, Donald (Calder V)


Ryder, Richard
Thorne, Neil (Ilford S)


Sackville, Hon Thomas
Thurnham, Peter


Sainsbury, Hon Timothy
Townsend, Cyril D. (B'heath)


St. John-Stevas, Rt Hon N.
Trotter, Neville


Shepherd, Colin (Hereford)
Vaughan, Sir Gerard


Shersby, Michael
Waddington, David


Sims, Roger
Wakeham, Rt Hon John


Smith, C.(Isl'ton S &amp; F'bury)
Walker, Bill (T'side N)


Smith, Sir Dudley (Warwick)
Wall, Sir Patrick


Smith, Tim (Beaconsfield)
Waller, Gary


Soames, Hon Nicholas
Warren, Kenneth


Speller, Tony
Watson, John


Spicer, Jim (W Dorset)
Watts, John


Spicer, Michael (S Worcs)
Wells, Bowen (Hertford)


Squire, Robin
Welsh, Michael


Stanbrook, Ivor
Wheeler, John


Stanley, John
Whitfield, John


Stern, Michael
Wiggin, Jerry


Stevens, Lewis (Nuneaton)
Williams, Rt Hon A.


Stevens, Martin (Fulham)
Wolfson, Mark


Stewart, Allan (Eastwood)
Wood, Timothy


Stewart, Andrew (Sherwood)
Woodcock, Michael


Stewart, Ian (N Hertf'dshire)
Yeo, Tim


Stradling Thomas, J.
Young, Sir George (Acton)


Sumberg, David



Tapsell, Peter
Tellers for the Ayes:


Taylor, Teddy (S'end E)
Mr. Robert Boscawen and Mr. Carol Mather.


Tebbit, Rt Hon Norman



Temple-Morris, Peter





NOES


Alton, David
Wainwright, R.


Bruce, Malcolm
Wallace, James


Cartwright, John
Wrigglesworth, Ian


Howells, Geraint



Meadowcroft, Michael
Tellers for the Noes:


Owen, Rt Hon Dr David
Mr. Simon Hughes and Mr. Michael Hancock.


Thomas, Dafydd (Merioneth)

Question accordingly agreed to.

Orders of the Day — Mentally Handicapped (Riding Scheme)

Motion, made, and Question proposed, That this House do now adjourn.—[Mr. Major.]

Mr. Harry Greenway: I am sure that in introducing an Adjournment debate on sport—in this instance riding—the House will join me in wishing my hon. Friend the Member for Lewisham, East (Mr. Moynihan) good luck as he takes off tomorrow morning for the Olympic games, where he will be in the British eight and fighting for Britain, as he does in so many excellent ways. I am sure that we all wish him well. We shall be watching for him and rooting for him.
The debate is directed to another sort of sportsman and one with which the world is in great sympathy, and that is the mentally handicapped rider. For 20 years I have been interested in, supporting and working for children and adults who have been taking part in riding schemes that have been promoted for most of that time by the Mencap riding fund that is run by a gentleman called Joe Royds of Hereford, who has done a magnificent job. He has travelled about the world and this country begging for money, with which he has produced enabling schemes for the mentally handicapped to ride. We have all found that there is tremendous benefit to the mentally handicapped who participate in these schemes.
In recent years, especially during the incumbency of my hon. Friend the Minister of State, Department of Employment, the schemes have had magnificent support from the Department of Employment. My hon. Friend has taken a central part in ensuring that the schemes are well supported and well regarded. I pay tribute to him on behalf of the mentally handicapped, who cannot speak for themselves, and thank him for all that he has done. The riding schemes for the mentally handicapped differ from those for the disabled, which come under the aegis of the British Horse Society. The two run together, but not as one. I pay great tribute to the Riding for the Disabled association for the marvellous work it does for people of all ages, but especially for children, who suffer from a handicap—blindness, deafness, autism, maladjustment, educational subnormality. The chairman of the association is Mrs. Patricia Langford, who is to be congratulated on all that she and her scheme does.
I have worked with both schemes for 20 years and have been especially involved in promoting schemes for mentally handicapped children and other children with special difficulties and needs in London schools. Twenty years ago, I founded a riding scheme for mentally handicapped children and ordinary children who suffer no disability but live in high rise city flats. They have no access to the countryside, and are not permitted to have animals—not even a mouse—in those flats. That riding scheme celebrated its 20th anniversary in May 1984. We had a marvellous party for the children, and some of those who participated in the scheme 20 years ago were there. It was a thrilling experience. Many of those children have gone on to become involved in careers of one sort or another involving horses, but that is a separate story.
The riding schemes sponsored by Mencap are financed under the Manpower Services Commission's community programme which is designed to provide temporary

employment for the long-term unemployed and projects of value to the community. I gather from the MSC that Mencap has contracted to provide about 750 jobs, many of them part time, in nine projects. About 350 of those jobs involve starting schemes to provide assistance for the mentally handicapped. The community programme participants assist the handicapped to ride. They help to maintain the horses and learn animal husbandry, if they are interested, as well as how to assist the handicapped.
The MSC is sending me detailed information on what is happening under some of those schemes which have recently come into being. Basically, all the schemes have one objective—to get mentally handicapped children and adults on horseback to receive the therapy that will bring to them. The Mencap projects have undoubtedly been successful. That fact has been recognised by the Ministry and especially my hon. Friend the Minister of State. That has been shown by the fact that the projects have been given funding for a second year.
The handicapped have profited from riding, experiencing confidence and a sense of worth in their participation in the project. The severely mentally handicapped, who have more obvious disabilities, have profited from contact with the long-term unemployed who are involved in the community projects. That is a notable benefit of the scheme. It is a moving experience to help mentally handicapped people in that way. The mentally handicapped quickly form a relationship with other people if those people are sufficiently relaxed. If one does what is needed—leading a horse, helping a child or adult to mount, and helping a child while he is on a horse or pony—one experiences the natural gratitude of and a sense of relationship with the mentally handicapped, and that is hugely rewarding. The Government have done a great thing in fostering that scheme, and bringing out those aspects. Mentally handicapped adults do not gain great therapy from riding, but they have a greatly enhanced sense of dignity and socialisation. The mutual distrust between the handicapped and the non-handicapped is weakened.
Great help is given to the mentally handicapped through horse contact. It is rewarding to both riders and helpers in every sense. I know that it is an expensive project, and I am grateful for the resources committed to it by my hon. Friend the Minister. Two thirds or three quarters of children aged between 5 and 16— the age range that profits most—achieve great benefits from riding, and it is, therefore, therapy. A rider's outlook on himself is changed by the magical powers of the horse. He changes from an individual feeling like a failed vegetable to one feeling a real person with a chance and purpose in life. That change is a catalyst for the acceptance of further learning of all skills—primary, personal and, in some cases, secondary and social.
I could say a great deal on the subject, but I want now to consider the figures involved and urge my hon. Friend to do even more, if he can. Mencap has undertaken to sponsor 750 places under the community programme, and 61 per cent. of those are for riding projects directly for the mentally handicapped. The localities of the riding projects are Blackburn, Leeds, Liverpool, Darlington, Glasgow, Halifax, Rochdale, Caterham in Surrey, and Sheffield. That is a limited spread, welcome though it is. I remind the House that the mentally handicapped live in all parts of the country, and I am sure that the House will share my sense of aspiration for a spread of this excellent activity.


I should like to have such a project in Ealing in my constituency as I know that many adults and children would benefit greatly from it.
Each of the schemes has been approved by the Manpower Services Commission for a second year of funding from 1 March 1984. In addition, approval has been given for the establishment of a 10th project in Wales, which will start on 1 September 1984. It is very welcome because it is the first scheme outside England. There is much to be said for giving help in as wide an area as possible.
A person of distinction recently watched riding activities for the mentally handicapped, and wrote to me describing them. He said:
A wide variety of mentally handicapped people—differing from each other in age, sex and physical and mental ability—got a great deal of very visible pleasure from their riding. Some of that, I would guess, came from being the centre of attention in a large institution where people can easily be dwarfed by buildings or "lost" in the crowd. Some came from the sense of achievement; some from being up in the air and looking down at the rest of the world for a change; and some from the relationship from the young helpers—a natural and unpretentious relationship. I dare say that the physical contact with the horse also played its part.
That individual wrote to me as a non-horse person, and said that he could not pretend to judge. But I can judge because I have ridden horses and ponies all my life and am a qualified instructor in all aspects of horse care and riding, including show jumping, cross country riding and so on. I have always been interested in the value of this sport for the underdog who has no other chance in life. My effort has been to bring people who do not have a chance by birth or any other way into relationships with horses. One can see the value of that.
It is nice to see you in the Chair, Mr. Speaker. I am charmed and touched that you should take the Chair for this debate at the end of such a long sitting. I know that that shows your warm interest in the subject.
It is worth recounting that there is something between the horse or pony and the mentally handicapped person; there is an indefinable rapport. One cannot describe it, but one can see it. Some mentally handicapped people cannot sit on horses, but to most of them it is natural. When they sit on horseback or ponyback, there is living communication between the two. It is of huge benefit to horses because they become totally relaxed, however difficult, thoroughbred and awkward they might be in other circumstances. Mentally handicapped people are always relaxed. Being high up is nice for them. There is also an extraordinary acceptance of the movement and feeling of the horse, and the smells that come from it. The unity of moving together gives an incentive to speak, live and find something new in life. The fact that we manage to do that for the mentally handicapped, who cannot speak for themselves, means that we are giving something in a world in which so many of them have absolutely nothing. What could be better. My correspondent went on to say of what he saw:
It is clear that the riding schemes have a part to play in the much wider process of socialisation—habilitation—which needs to precede the movement of mentally handicapped people from large hospitals"—
my correspondent saw the riding at a hospital—
to a small community unit or ordinary house, and the more normal life that goes with it. For those who are living in the community, this is one dimension of the normal range of

activities that they can enjoy and can share with others. For the young unemployed people who make it possible, there is the chance to work with horses, to do something useful that folk are willing to come to see and to write up, and to get to know and work alongside mentally handicapped people, obviously also offers something of importance.
This is not an area for sentimentality. It is not necessary. To be unduly sentimental is to insult the mentally handicapped. They do not need it and do not look for it. They have a marvellous way of establishing relations with people such as their own families and those whom they have never met before in a very short space of time, as well as with animals.
As a society we must always take advantage of the chances of greater civilisation that proper systems, encouragement and relationships with the mentally handicapped give us. Having the horse and the pony—with all that that means—as allies in this important area is of the highest value. I ask my hon. Friend the Minister to say that the Government not only will continue to support to the excellent work that has been allowed to start, but will go further, as funds permit. The phrase "as funds permit" can often be a little nebulous and meaningless, but let funds permit at an early stage. Let us have great expansion this year and next year, but always with proper control because that is fundamental. I have pleasure in asking the House to accept my words on this important subject.

Mr. Humphrey Malins: I am most grateful to my hon. Friend the Member for Ealing, North (Mr. Greenway) and to my hon. Friend the Minister for allowing me to say a few words in this important debate and to echo the comments of my hon. Friend the Member for Ealing, North who has such an outstanding reputation in this area.
On 9 June, in company with you, Mr. Speaker, and other Croydon Members, I was privileged to be present when the Mencap riding fund launched its project at St. Lawrence's hospital in Caterham, a very fine hospital serving a wide area full of caring people. I know that for you, too, Mr. Speaker, it was a heartwarming day. The purpose was to launch the scheme established by Mencap in conjunction with the Manpower Services Commission.
The demonstration that we saw showed what could be achieved and how much benefit could be derived from riding by handicapped and physically disabled people. We saw the powerful, therapeutic bond established between the horses and their handicapped riders and it was encouraging to see how riding could help people to get better. I am sure that statistics will show that handicapped people can be helped to get better and better through these schemes. St. Lawrence's hospital not only serves its own residents but provides immense help to the surrounding community and the many non-resident handicapped people in the area. As we know, the Croydon health authority is also greatly interested in the project and well aware of the benefit that it brings.
I strongly support the comments of my hon. Friend the Member for Ealing, North. I believe that these riding schemes are the thing of the future for the handicapped, especially for children. Youngsters can be seen to improve constantly and to gain confidence through riding. In many cases, they get back to complete normality. At the end of the day, I believe that money will be saved as a result of the schemes because it costs so much to look after the


serverely handicapped. As well as providing enormous pleasure and improvement for them, public money can be saved. I know that you, Mr. Speaker, admired the scheme at St. Lawrence's enormously as did I and other Croydon Members, including my hon. Friend the Member for Croydon, South (Sir W. Clark) and my hon. Friend the Financial Secretary who are thoroughly involved in this. We wish the project all the very best for the future.

The Minister of State, Department of Employment (Mr. Peter Morrison): It is not often that one is able to associate you, Mr. Speaker, with a particular cause, but, as my hon. Friend the Member for Croydon, North-West (Mr. Malins) so ably said today, and indeed informed me beforehand, I know that Mencap is something very special to you.
We should not be able to discuss this subject had not my hon. Friend the Member for Ealing, North (Mr. Greenway) raised it on the Adjournment, and I am extremely grateful to him for doing so. I am also very grateful for his kind words about my own association with the community programme.
I begin by saying that I agree entirely with my hon. Friend's comments about our hon. Friend the Member for Lewisham, East (Mr. Moynihan) who leaves tomorrow to take part in the Olympic games. I am sure that the whole House wishes him every success. I hope that he will return with a gold medal, not least because I have never seen one and I should like to do so.
The community programme, which is so closely associated with Mencap, is an important part of our general strategy to help the long-term unemployed back into the world of work. The real way of getting them back into work is to follow sensible economic and financial strategies which will set the economy to rights, but meanwhile, we are spending about £2 billion on special employment and training measures. That vast sum of money is currently giving direct help to about 624,000 people.
Many of these measures help the long-term unemployed. Apart from the community programme, there is the enterprise allowance scheme, from which 34,000 people have benefited, more than 10,000 of whom have been long-term unemployed. Our voluntary projects programme, which is closely connected with charities such as Mencap, provides work-relates opportunities for unemployed people to take up on a voluntary basis. More than half the participants in that programme are long-term unemployed. The job release scheme also helps the long-term unemployed.
The community programme was announced by my right hon. and learned Friend the then Chancellor of the Exchequer—now the Foreign Secretary—on 9 March 1982. It is a successor to the community enterprise programme, which provided 30,000 temporary jobs to help the long-term unemployed. The community programme will provide up to 130,000 places. My hon. Friend asks for more places for the programme because it is doing such good work. He will appreciate that there has already been a significant expansion. The community enterprise programme provided only full-time jobs, but the community programme provides both full and part-time jobs. Our target is 130,000 filled places, and at the end of May 116,000 places had been filled. Each year, some 200,000 unemployed people will participate.
I should remind the House that the cost is large. Some £500 million in taxpayers' money is committed to the programme. But—money aside—we are dependent upon sponsors to come forward with ideas to help the unemployed and benefit the local community. My hon. Friend has ably pointed out the benefit to Mencap.
The work proposed must improve the long-term employment prospects of those who take part. If a sponsored application is to succeed, the proposed work must be of direct and tangible benefit to the community. It must also be work not done in the normal course of events. Those eligible to take part must have been unemployed for more than 12 out of the previous 15 months if they are aged over 25. If they are aged between 18 and 24, they must have been unemployed for six out of the previous nine months. Of the entrants, 55 per cent. are in the 18 to 24 age group, and 3·5 per cent. are registered disabled. Last November we announced that the programme would extend to October 1986 and that the target of 130,000 filled places was to be retained.
My hon. Friend would like more places to be provided. Competition for places is now intense. The projects are considered by local area manpower boards, on which industry and other organisations are represented. It is those boards' role to decide which of the many projects that they consider will do most to improve the employment prospects of participants and provide direct and tangible community benefits.
In view of the competition for places, no guarantes can be given that individual projects will have their funding renewed at the end of each year. There is a wide variety of projects under the community programme. There are environmental schemes to clear up eyesores—I have seen a few—there are schemes that encourage energy conservation such as loft insulation for elderly people and there are schemes involved in construction or renovation work on buildings that are used by the local community. There are also schemes such as the Mencap riding scheme, which helps disadvantaged groups socially.
I am genuinely grateful—I know that the Manpower Services Commission is as well—for the contribution of voluntary organisations such as Mencap to the success of the programme. The sponsors are local authorities to the tune of 47 per cent. and voluntary organisations to the tune of 40 per cent. Other voluntary organisations help disabled people under the community programme. The National Elfrida Rathbone Society, Outset, Physically Handicapped and Able Bodies and Schemes for the Deaf also make a significant contribution.
If hon. Members did not know of Mencap's valuable work before today, thanks to my hon. Friend the Member for Ealing, North they do now. It is principally an organisation of parents. It operates throughout the United Kingdom and provides a range of services for mentally handicapped people, their families and professionals who work for them. It aims to improve provision for mentally handicapped children and adults by increasing public knowledge and concern, and by mounting projects such as the riding schemes to show that mentally handicapped people can be trained to expand their capabilities.
Mencap's secretary-general is Brian Rix and it was involved in the community programme from the start. Mr. Joe Royds, the manager of Mencap's riding fund, has made an outstanding contribution for a considerable time. In a letter, he wrote:


the Community Programme has been published and the situation has changed from dead slow to full steam ahead! It has been seen as the green light for us, which indeed it specifically is.
The first riding scheme was at Great Barr in Birmingham and was funded under the old youth opportunities programme from 1979 to 1982. It was sponsored as a community projects scheme by the Walsall Guild for Voluntary Service. The riding schemes were not considered suitable for funding under the youth training scheme, so Mencap started negotiations in October 1982 for support under the community programme. Its first agreement to act as a national community programme agent was signed in February 1983. Its current agreement, which started on 1 March 1984, is for 730 places. Riding projects now account for 61 per cent. of them. The driving force behind the riding schemes has been Mr. Joe Royds. I have met him and I have been deeply impressed by his drive and determination to get his projects off the ground.
Projects such as these do not happen by mistake, but thanks to hard work and personal commitment. That is what Mr. Royds and, no doubt, many others in Mencap's organisation have been doing. They have been working hard and committing themselves personally. As a result, they now have nine schemes across the country, and my hon. Friend the Member for Ealing, North referred to some of them. They include Liverpool, and Sheffield, and the right hon. Member for Glasgow, Govan (Mr. Millan) will

be pleased to hear that there is one in Glasgow. There is a further project for 50 places in the pipeline. This was approved on 10 July by the area manpower board, and will operate in Newport, Gwent.
As my hon. Friend pointed out, the scheme's aim is to improve the skills and self-confidence of mentally handicapped children and adults. I have no doubt that the leaders and the helpers, working together with the mentally handicapped, achieve that aim. In an article in the Horse and Hound in July 1983 it was said:
The leaders and helpers appeared to forget themselves completely in their devotion to the job. Their reward is not the fifty quid a week less bus fares, but seeing the results of their labours. When you have changed an unresponsive dullard into a lively child you tend to forget the rate for the job.
I am sure that is what all those who participate in the scheme feel.
I am grateful to my hon. Friend the Member for Ealing, North for raising this matter on the Adjournment. It is nice, for once, to be able to discuss something on which there is no disagreement in the House. We all know that Governments, voluntary organisations and those who are less fortunate are working together in harmony. I am genuinely grateful to my hon. Friend for this opportunity to debate the contribution that Mencap and those involved have made to the community programme since its inception.

Question put and agreed to.

Adjourned accordingly at eight minutes to Nine o' clock.